In times such as now, equity allocation needs to be increased. One could also look at other options like FDs.
One may expect equity investors to be aware of the markets’ being subject to volatility. Volumes have been written about how a long-term strategy should see one’s equity market investments rise even in a volatile market. So, it would be reasonable to expect those with a clear time horizon and goal-oriented investments to do well. Let’s take a look at what investors could do in situations like now, where the markets have drifted downwards and are now staying in a range.
The worst thing would be to cash out one’s equity assets. Typically, investors get in when the markets are trending higher. There are lots of fence sitters when the markets are rising. It is when the markets have run up almost to the top that the stampede to get in begins. That’s the wrong time.
Again, when the markets have started sliding, investors want to sit out the slump. But they suddenly lose their nerve when markets go down the tube, on a continuous losing trend. At some such point, a stampede starts. They just book their losses and exit out, costs be damned. Most people don’t look at the market at all till there is a frenzy again.
By the asset allocation principle, one would need to commit more money to equities at present, as their values would have eroded and they’d have a smaller share in the asset allocation pie. Hence, equity allocation actually needs to be increased. Though it may be a gut-wrenching decision at this point, it will prove a winner over time. Even if one is not doing that, one could at least wait out this slump.
One should continue with Systematic Investment Plans (SIPs). Customers want to know if they should stop SIPs at this point, since the markets are down. On the contrary, all purchases done in this period through SIPs would help the investors get a higher number of units, ultimately helping them when the markets turn for the better.
Running after gold, as it is giving exceedingly good returns now, is also not advised. Gold is going up due to speculative activity. Gold exchange traded funds (ETFs) worldwide are collecting huge corpus and buying gold to be kept in their vaults. There is no productive use for this gold. It is just that there is a widespread expectation that gold will trend higher. It could do so, but this is speculative activity. Due to currency debasement and uncertainty in the world, gold is a comfort investment. Keep it that way. Invest between five and 10 per cent of your corpus in gold and other precious metals, through ETFs or similar options, instead of direct physical investments. Physical investments have additional costs and are also subject to wealth tax. Silver had already shown what can happen when there is massive speculation – it dropped 30 per cent in three days, when higher margins were imposed.
For those who invest in stocks, they could look at picking defensive themes like fast moving consumer goods, pharma and so on. The profitability of companies is coming down. In such situations, large market capitalisation companies and others with leadership positions in their industries could be good bets. Such companies have better pricing power and ability to weather the storm. If investments are through mutual funds (MFs), schemes investing in the above areas would be good bets.
For those with a long time horizon, of three to five years and beyond, mid-cap and small-cap companies would be good picks, as their prices are beaten down and offer good valuations now. If the goals are long-term, these investments could be a good idea.
For those wanting to put in a large sum of money in equity assets, they could break up the money and invest over time to take advantage of market fluctuations and spread their risks. In case of MF investments, these can be done in debt funds and can be transferred to appropriate equity funds over time.
OPTIONS
Volatility in equity markets often results in retail investors looking at other available investment avenues. For fixed income investors, fixed income monthly plans (FMPs) are a good idea. The underlying investments in FMPs, viz corporate paper (CPs) and corporate deposits (CDs), are now offering over 10 per cent returns.
If a person is in the dividend option, they could get 8.6 per cent or more returns, post-tax.This is attractive and is well above what the Public Provident Fund (PPF) offers. Best of all, this comes in an FMP with just over one year duration. There are bank fixed deposits (FDs,) company FDs and bond offerings which are attractive, too.
There is another excellent option before retail investors. Since the interest rate cycle is more or less at the peak and is expected to taper in about six months, there is potentially money to be made by investing in government securities - the G-sec funds which will give very good returns when the markets turn. Other funds holding corporate paper can similarly give good returns. Or, one could invest in dynamically managed debt funds, which a fund manager would manage and time the entry and exits of various investments, which is critical here.
Predicting the direction of the market is fraught with danger; even experts can’t do so. Taking a long-term view and investing and taking advantage of the present situation is the wise thing to do.
Saturday, June 11, 2011
MTNL, pvt telcos to share towers
The telecom PSU plans to get back in black in two years; BSNL too has started discussions to lease out its towers.
Mahanagar Telephone Nigam Ltd (MTNL) plans to share its passive infrastructure, including towers, with private service providers as part of its efforts to boost revenue and put the state-owned company back in black in two years.
MTNL, which offers services in Delhi and Mumbai, has about 1,400 towers and plans to add 700 more this financial year. It had reported a loss of around Rs 2,800 crore for 2010-11.
MTNL
Has services in Delhi & Mumbai only
Has about 1,400 towers
Plans to add 700 more this FY
Has reported Rs 2,800 crore loss for 2010-11
BSNL
Provides services across India, except Delhi & Mumbai
Has 40,000 towers
Posted a loss of Rs 1,823 crore for 2009-10
Expected to report Rs 2,500 crore loss for 2010-11
A senior company official told Business Standard that MTNL had invited expression of interest (EoI) for sharing of base transceiver stations (BTS) and other passive infrastructure in Delhi. Subsequently, an EoI for sharing of BTS sites in Mumbai would be called, he said.
BTS are mainly installed over towers. But sometimes, these are also installed indoor. Majority of MTNL’s BTS sites are at its own exchange sites.
The company had earlier shared some of its BTS sites with other service providers on an experimental basis. Following its success, MTNL has planned to extend it to both the circles it operates in, according to the official.
The development comes close on the heels of another state-run telecom company, BSNL’s, plan to hive off its tower business to a separate subsidiary to unlock value. BSNL, which provides services across the country except Delhi and Mumbai, has 40,000 towers. It has also started discussions with private players to lease out its towers.
Amid declining revenues and market share in a cut-throat competition, both telecom players are trying hard to generate additional revenues, and leasing out towers to private service providers is one such step.
For 2009-10, BSNL posted a loss of Rs 1,823 crore, the first time since its inception in 2000. It is expected to report about Rs 2,500 crore loss for 2010-11.
The leasing of towers is in the interest of these companies, as there are already many infrastructure providers, who will lease out towers to telecom companies, if not MTNL and BSNL.
Most new telecom service providers are not looking to invest in towers, while incumbents such as Bharti Airtel and Vodafone-Essar have spun off their tower businesses.
Mahanagar Telephone Nigam Ltd (MTNL) plans to share its passive infrastructure, including towers, with private service providers as part of its efforts to boost revenue and put the state-owned company back in black in two years.
MTNL, which offers services in Delhi and Mumbai, has about 1,400 towers and plans to add 700 more this financial year. It had reported a loss of around Rs 2,800 crore for 2010-11.
MTNL
Has services in Delhi & Mumbai only
Has about 1,400 towers
Plans to add 700 more this FY
Has reported Rs 2,800 crore loss for 2010-11
BSNL
Provides services across India, except Delhi & Mumbai
Has 40,000 towers
Posted a loss of Rs 1,823 crore for 2009-10
Expected to report Rs 2,500 crore loss for 2010-11
A senior company official told Business Standard that MTNL had invited expression of interest (EoI) for sharing of base transceiver stations (BTS) and other passive infrastructure in Delhi. Subsequently, an EoI for sharing of BTS sites in Mumbai would be called, he said.
BTS are mainly installed over towers. But sometimes, these are also installed indoor. Majority of MTNL’s BTS sites are at its own exchange sites.
The company had earlier shared some of its BTS sites with other service providers on an experimental basis. Following its success, MTNL has planned to extend it to both the circles it operates in, according to the official.
The development comes close on the heels of another state-run telecom company, BSNL’s, plan to hive off its tower business to a separate subsidiary to unlock value. BSNL, which provides services across the country except Delhi and Mumbai, has 40,000 towers. It has also started discussions with private players to lease out its towers.
Amid declining revenues and market share in a cut-throat competition, both telecom players are trying hard to generate additional revenues, and leasing out towers to private service providers is one such step.
For 2009-10, BSNL posted a loss of Rs 1,823 crore, the first time since its inception in 2000. It is expected to report about Rs 2,500 crore loss for 2010-11.
The leasing of towers is in the interest of these companies, as there are already many infrastructure providers, who will lease out towers to telecom companies, if not MTNL and BSNL.
Most new telecom service providers are not looking to invest in towers, while incumbents such as Bharti Airtel and Vodafone-Essar have spun off their tower businesses.
Volatile market conditions ahead, investors should be cautious: Analysts
The domestic stock markets are currently under the influence of the interplay of many macroeconomic factors. The market movement will depend on how these factors play out in the next few weeks. Primary among them is quantitative easing. Investors have to track these factors closely before they invest further in the stock markets.
Sluggish US economy
The US economy has slowed down according to the latest data. The report, known as the 'Beige Book' , based on anecdotal information gathered by officials at the Fed regional banks, says that for the period April and May there has been a softening in the GDP growth in the US. This has currently been attributed to the burden of high gas prices that has weakened consumer spending .
The US Fed's Governor Ben Bernanke felt the slowdown due to high gas prices and Japan's crises is temporary and growth should pick up later this year without additional support in the form of another round of quantitative easing.
Quantitative easing II
Despite the recent weakening economic data, the Fed's enormous treasury buying programme is expected to conclude in June 2011. Many investors say quantitative easing two (QE2) has boosted stock prices in the US since late last year. Further, the stimulus has driven commodity prices higher due to carry trade, and has depressed the dollar.
With QE2 coming to an end the opposite is happening . The stock markets are on a decline trend and the dollar has strengthened against other currencies. The ending of QE2 is expected to unwind the carry trades in commodities and bring commodity prices lower.
Global liquidity pie shrinking
The end of QE2 will shrink the global liquidity pie. The Asian markets such as Hong Kong were a key beneficiary of the flood of liquidity that entered the global financial system as a result of the Fed's actions last November.
But if liquidity in the whole world is shrinking, then it becomes a question of which markets can attract this contracting liquidity. Analysts are of the opinion that emerging markets such as China are poised to attract the shrinking global liquidity due to their superior GDP growth.
Sluggish US economy
The US economy has slowed down according to the latest data. The report, known as the 'Beige Book' , based on anecdotal information gathered by officials at the Fed regional banks, says that for the period April and May there has been a softening in the GDP growth in the US. This has currently been attributed to the burden of high gas prices that has weakened consumer spending .
The US Fed's Governor Ben Bernanke felt the slowdown due to high gas prices and Japan's crises is temporary and growth should pick up later this year without additional support in the form of another round of quantitative easing.
Quantitative easing II
Despite the recent weakening economic data, the Fed's enormous treasury buying programme is expected to conclude in June 2011. Many investors say quantitative easing two (QE2) has boosted stock prices in the US since late last year. Further, the stimulus has driven commodity prices higher due to carry trade, and has depressed the dollar.
With QE2 coming to an end the opposite is happening . The stock markets are on a decline trend and the dollar has strengthened against other currencies. The ending of QE2 is expected to unwind the carry trades in commodities and bring commodity prices lower.
Global liquidity pie shrinking
The end of QE2 will shrink the global liquidity pie. The Asian markets such as Hong Kong were a key beneficiary of the flood of liquidity that entered the global financial system as a result of the Fed's actions last November.
But if liquidity in the whole world is shrinking, then it becomes a question of which markets can attract this contracting liquidity. Analysts are of the opinion that emerging markets such as China are poised to attract the shrinking global liquidity due to their superior GDP growth.
Barack Obama calls on private sector to create jobs
WASHINGTON: US President Barack Obama on Saturday called for the private sector to create more jobs, but underlined the government's role in promoting professional education.
"Now, government is not -- and should not be -- the main engine of job-creation in this country. That's the role of the private sector, " the president said in his weekly radio and internet address.
"But one thing government can do is partner with the private sector to make sure that every worker has the necessary skills for the jobs they're applying for," Obama added.
His comments came after labor department figures showed only 54,000 new jobs had been created in May, just a quarter of the February-April pace; the unemployment rate had edged up to 9.1 percent.
The White House and economists cautioned that the poor data was likely a monthly blip, but it has fueled allegations that Obama's economic policies are failing, 18 months ahead of the presidential election.
The president noted that the US economy had not got into what he called a "mess" overnight, and would not resolve its problems quickly.
"It's going to take time," he warned.
Obama pointed to the importance of investing in wind power, solar power, and biofuels to make America less dependent on foreign oil and to clean up the environment.
"These are steps we know will make a difference in people's lives -- not just twenty years from now, or ten years from now, but now, and in the months to come," the president said.
"Now, government is not -- and should not be -- the main engine of job-creation in this country. That's the role of the private sector, " the president said in his weekly radio and internet address.
"But one thing government can do is partner with the private sector to make sure that every worker has the necessary skills for the jobs they're applying for," Obama added.
His comments came after labor department figures showed only 54,000 new jobs had been created in May, just a quarter of the February-April pace; the unemployment rate had edged up to 9.1 percent.
The White House and economists cautioned that the poor data was likely a monthly blip, but it has fueled allegations that Obama's economic policies are failing, 18 months ahead of the presidential election.
The president noted that the US economy had not got into what he called a "mess" overnight, and would not resolve its problems quickly.
"It's going to take time," he warned.
Obama pointed to the importance of investing in wind power, solar power, and biofuels to make America less dependent on foreign oil and to clean up the environment.
"These are steps we know will make a difference in people's lives -- not just twenty years from now, or ten years from now, but now, and in the months to come," the president said.
My success story will inspire comman man: Narayana Murthy
BANGALORE: A self-proclaimed common man who created uncommon wealth for shareholders, employees and the founders got a warm farewell at the 30th annual general meeting of Infosys. N R Narayana Murthy on Saturday chaired the AGM for the last time as he hangs up his boots in August at Infosys — his "middle child".
Addressing shareholders, among whom sat people with just 15 shares and those with lakhs, Murthy said: "I am an average person with many below-average attributes.... My little story should be a confidence-booster for every average person in the world (so) that he or she can make a difference, at least in a small way, to this world."
Such typical humility apart, what's incontestable is the fact that Murthy will go down as the architect of one of the biggest wealth-creation stories in India. Infosys employees, through stock options, have benefited to the extent of Rs 50,000 crore as the company has distributed 27% of its equity among them. The dividend distributed among the shareholders amounts to Rs 11,623 crore. The market capitalisation of Infosys, with 4.5 lakh shareholders, has annually grown at a compounded rate of 50% since 1994, making it India's second most valued technology company.
Watched by his newlywed son Rohan, daughter-in-law Lakshmi, wife Sudha and the families of other founders and senior executives, Murthy said turning 30 — Infosys is in its 30th year of operations — is a good time to reflect and look ahead. Thirty is also a time to break new ground.
The company, which announced four new members to its board — V Balakrishnan, Ashok Vemuri, BG Srinivas and Anne Fudge — is positioning itself for a new version: Infosys 3.0. Murthy said: "The crucial things we have to do are: be firm in pursuing our values, recognize our weaknesses, embrace meritocracy, be open-minded about learning from people better than us, learn from our mistakes and not repeat them, be humble, honest and courteous, be firm in taking quick decisions."
"The Infosys journey has been an integral part of my life. My colleagues say Infosys is an inseparable part of me, and I am an inseparable part of Infosys. I have been a No. 1 actor in every major decision taken in this company so far. I have rejoiced in every milestone of the company." He admitted: "It is not easy for me to deliver my last address at this forum. As I speak, a mosaic of images from the past whizz through my mind. The list seems endless, and it would be difficult to narrate them all. The day we assembled in my tiny apartment in Mumbai to decide that respect from every shareholder was the most valuable thing for us, was momentous.
Addressing shareholders, among whom sat people with just 15 shares and those with lakhs, Murthy said: "I am an average person with many below-average attributes.... My little story should be a confidence-booster for every average person in the world (so) that he or she can make a difference, at least in a small way, to this world."
Such typical humility apart, what's incontestable is the fact that Murthy will go down as the architect of one of the biggest wealth-creation stories in India. Infosys employees, through stock options, have benefited to the extent of Rs 50,000 crore as the company has distributed 27% of its equity among them. The dividend distributed among the shareholders amounts to Rs 11,623 crore. The market capitalisation of Infosys, with 4.5 lakh shareholders, has annually grown at a compounded rate of 50% since 1994, making it India's second most valued technology company.
Watched by his newlywed son Rohan, daughter-in-law Lakshmi, wife Sudha and the families of other founders and senior executives, Murthy said turning 30 — Infosys is in its 30th year of operations — is a good time to reflect and look ahead. Thirty is also a time to break new ground.
The company, which announced four new members to its board — V Balakrishnan, Ashok Vemuri, BG Srinivas and Anne Fudge — is positioning itself for a new version: Infosys 3.0. Murthy said: "The crucial things we have to do are: be firm in pursuing our values, recognize our weaknesses, embrace meritocracy, be open-minded about learning from people better than us, learn from our mistakes and not repeat them, be humble, honest and courteous, be firm in taking quick decisions."
"The Infosys journey has been an integral part of my life. My colleagues say Infosys is an inseparable part of me, and I am an inseparable part of Infosys. I have been a No. 1 actor in every major decision taken in this company so far. I have rejoiced in every milestone of the company." He admitted: "It is not easy for me to deliver my last address at this forum. As I speak, a mosaic of images from the past whizz through my mind. The list seems endless, and it would be difficult to narrate them all. The day we assembled in my tiny apartment in Mumbai to decide that respect from every shareholder was the most valuable thing for us, was momentous.
Friday, June 10, 2011
Punj Lloyd trades firm, but brokerages sceptical
The stock of Punj Lloyd has been on the upswing after the company reported a good financial performance for the fourth quarter ended March 31. However, brokerages are sceptical about the company's performance going forward, owing to its ongoing Libya and ONGC crisis.
The infrastructure major has reported a consolidated net profit of Rs 18 crore for the fourth quarter ended March 31,, as against a net loss of Rs 302 crore in the corresponding quarter last fiscal.
“We see the following negative catalysts for Punj Lloyd: Weak order inflow trend continuing in FY12; further deterioration in execution and receivables cycle; and lower-than-expected FY12 margins,” said Goldman Sachs. While maintaining ‘sell' on Punj Lloyd, it revised the price target to Rs 57 from earlier Rs 62.
Roadblocks
According to Credit Suisse, “Given the low margins on order book and adjusted order book decline of over 30 per cent Y-o-Y (adjusted for non-moving Libya orders), it may be difficult for financial performance to improve next year. Therefore, we believe consensus numbers are at risk. Adjusted for auditor qualifications and assets in Libya, the stock is trading at 1.4x its adjusted book value of Rs 49/share.”
An Emkay report, which maintained a ‘hold' rating on Punj Lloyd, with a price target of Rs 91, said: “So far, Punj Lloyd has shown chequered performance — with good performance in few quarters and disappointment in many quarters. Further, progress on large orders remains tardy impacting the revenues and corresponding EBIDTA margins.” Until there is stabilisation of operations with no negative surprise, a change in rating is not warranted, the report opined.
Punj Lloyd still has outstanding issues with cost over-runs in its ONGC project and has claims outstanding of Rs 243 crore, which has been qualified by the auditor.
Another domestic brokerage Batlivala & Karani said: “The current order book of the company stands at Rs 22,800 crore, and is 2.2x FY-12E sales, which is low compared to its peers. Out of this, work on Rs 3,000-crore worth of projects in Libya is currently halted. Net addition to the order book has been very low during FY11 due to cancellation of Rs 6,250-crore Libyan orders.”
The infrastructure major has reported a consolidated net profit of Rs 18 crore for the fourth quarter ended March 31,, as against a net loss of Rs 302 crore in the corresponding quarter last fiscal.
“We see the following negative catalysts for Punj Lloyd: Weak order inflow trend continuing in FY12; further deterioration in execution and receivables cycle; and lower-than-expected FY12 margins,” said Goldman Sachs. While maintaining ‘sell' on Punj Lloyd, it revised the price target to Rs 57 from earlier Rs 62.
Roadblocks
According to Credit Suisse, “Given the low margins on order book and adjusted order book decline of over 30 per cent Y-o-Y (adjusted for non-moving Libya orders), it may be difficult for financial performance to improve next year. Therefore, we believe consensus numbers are at risk. Adjusted for auditor qualifications and assets in Libya, the stock is trading at 1.4x its adjusted book value of Rs 49/share.”
An Emkay report, which maintained a ‘hold' rating on Punj Lloyd, with a price target of Rs 91, said: “So far, Punj Lloyd has shown chequered performance — with good performance in few quarters and disappointment in many quarters. Further, progress on large orders remains tardy impacting the revenues and corresponding EBIDTA margins.” Until there is stabilisation of operations with no negative surprise, a change in rating is not warranted, the report opined.
Punj Lloyd still has outstanding issues with cost over-runs in its ONGC project and has claims outstanding of Rs 243 crore, which has been qualified by the auditor.
Another domestic brokerage Batlivala & Karani said: “The current order book of the company stands at Rs 22,800 crore, and is 2.2x FY-12E sales, which is low compared to its peers. Out of this, work on Rs 3,000-crore worth of projects in Libya is currently halted. Net addition to the order book has been very low during FY11 due to cancellation of Rs 6,250-crore Libyan orders.”
RBI urged to re-look tight money policy as industry output dips
With hardening interest rates impacting consumer demand, the Chief Economic Advisor (CEA) to the Finance Ministry, Dr Kaushik Basu, on Friday virtually called the Reserve Bank of India to re-look its tight monetary stance.
“The RBI will have to balance its monetary policy tightening in view of growing concerns, particularly in consumer goods front, where higher interest rates are impacting demand,” Mr Basu told reporters here.
This comment comes less than a week before the central bank is to hold a mid-quarter review of its monetary policy. As part of its anti-inflation measures, the RBI has raised its key policy rates nine times since March 2010.
According to the latest Index of Industrial Production (IIP) data, the output in the consumer goods sector slowed to 2.9 per cent in April 2011 from 13.8 per cent in the year-ago period.
Even as there are fears of economic growth moderation, the RBI is widely expected to raise policy rates as part of its current tight monetary stance to tame inflation. The central bank may, however, desist from an aggressive increase (last time it went in for 50 basis points hike) given the slowdown in industrial output in April this year.
India's April 2011 industrial output grew 6.3 per cent compared with 13.1 per cent a year ago period, on account of poor showing in consumer goods, manufacturing and mining sectors.
Concerned over the falling industrial growth rate, the Finance Minister, Mr Pranab Mukherjee, told reporters today that “the IIP growth figures are disturbing. We need to wait for the longer-term IIP growth to see the trend”.
Factory output numbers
Meanwhile, the growth in factory output numbers for the fiscal 2010-11 has been revised upward to 8.2 per cent in the new series (with base as 2004-05) from 7.8 per cent projected in the series with 1993-94 as base year. Dr Basu said there will be a marginal upward revision in 2010-11 GDP figures following change in IIP growth for that year.
“There will be a small upward revision in 2010-11 GDP growth figure due to change in IIP growth. We are in the midst of re-calculation of our growth prospects. We will be able to come out with clear assessment by the end of the month,” Dr Basu said.
On the diesel price hike, Dr Basu said that the government should soon take a decision in this regard.
“We are committed to our fiscal consolidation target. We don't want to divert from it. We will very soon have to take stock of diesel prices,” Dr Basu said.
“The RBI will have to balance its monetary policy tightening in view of growing concerns, particularly in consumer goods front, where higher interest rates are impacting demand,” Mr Basu told reporters here.
This comment comes less than a week before the central bank is to hold a mid-quarter review of its monetary policy. As part of its anti-inflation measures, the RBI has raised its key policy rates nine times since March 2010.
According to the latest Index of Industrial Production (IIP) data, the output in the consumer goods sector slowed to 2.9 per cent in April 2011 from 13.8 per cent in the year-ago period.
Even as there are fears of economic growth moderation, the RBI is widely expected to raise policy rates as part of its current tight monetary stance to tame inflation. The central bank may, however, desist from an aggressive increase (last time it went in for 50 basis points hike) given the slowdown in industrial output in April this year.
India's April 2011 industrial output grew 6.3 per cent compared with 13.1 per cent a year ago period, on account of poor showing in consumer goods, manufacturing and mining sectors.
Concerned over the falling industrial growth rate, the Finance Minister, Mr Pranab Mukherjee, told reporters today that “the IIP growth figures are disturbing. We need to wait for the longer-term IIP growth to see the trend”.
Factory output numbers
Meanwhile, the growth in factory output numbers for the fiscal 2010-11 has been revised upward to 8.2 per cent in the new series (with base as 2004-05) from 7.8 per cent projected in the series with 1993-94 as base year. Dr Basu said there will be a marginal upward revision in 2010-11 GDP figures following change in IIP growth for that year.
“There will be a small upward revision in 2010-11 GDP growth figure due to change in IIP growth. We are in the midst of re-calculation of our growth prospects. We will be able to come out with clear assessment by the end of the month,” Dr Basu said.
On the diesel price hike, Dr Basu said that the government should soon take a decision in this regard.
“We are committed to our fiscal consolidation target. We don't want to divert from it. We will very soon have to take stock of diesel prices,” Dr Basu said.
Indian tobacco workers win health insurance
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New Delhi is to offer free health insurance to millions of workers who make hand-rolled tobacco sticks, known as bidis – or the poor man’s smoke.
The Indian cabinet, led by Manmohan Singh, prime minister, signed off a proposal this week to extend medical cover to the bidi industry’s entire 5.5m workforce within three years.
The move has drawn praise from parliamentarians despite an international trend to withdraw state support from the tobacco industry in the interests of public health.
The industry’s magnates include some who are close to power, including one cabinet minister. Praful Patel, the minister for heavy industries and former aviation minister, owns one of India’s biggest bidi and tobacco-derivatives businesses, Ceejay Tobacco.
He is a close political ally of Sharad Pawar, a Maharashtra strongman and the agriculture minister. Their influence is reflected by the bidi’s protected status, alongside chewing tobacco, as one of the cheapest, most lightly regulated and least taxed tobacco products in the world.
India has a 10th of the world’s smokers and is one of the fastest growing tobacco markets. An overwhelming number of India’s smokers, estimated at 100m, puff on the bidi, an unfiltered tightly rolled leaf.
A highly affordable cigarette, it is the bulwark of a uniquely Indian industry with political clout. Yet India introduced legislation three years ago banning smoking in public places, becoming one of a handful of developing countries to crack down on the habit.
Last year the government blocked new foreign investment in the tobacco industry, a move interpreted by foreign companies as protecting local interests.
“On the one hand, we are trying to phase out tobacco from the country, but on the other hand this creates a disincentive for people who are thinking of quitting the tobacco trade . . . because the moment you leave the trade you lose the medical benefits,” said Hemant Goswami of Tobacco Free India, a lobby group. “This medical benefit will keep you in the trade for a lifetime.”
Medical benefits should be extended to all the country’s workers and farmers, not just workers in a single industry, said Mr Goswami.
Mallikariun Kharge, the labour minister, said 1m bidi workers would be brought under the medical cover this financial year.
New Delhi is to offer free health insurance to millions of workers who make hand-rolled tobacco sticks, known as bidis – or the poor man’s smoke.
The Indian cabinet, led by Manmohan Singh, prime minister, signed off a proposal this week to extend medical cover to the bidi industry’s entire 5.5m workforce within three years.
The move has drawn praise from parliamentarians despite an international trend to withdraw state support from the tobacco industry in the interests of public health.
The industry’s magnates include some who are close to power, including one cabinet minister. Praful Patel, the minister for heavy industries and former aviation minister, owns one of India’s biggest bidi and tobacco-derivatives businesses, Ceejay Tobacco.
He is a close political ally of Sharad Pawar, a Maharashtra strongman and the agriculture minister. Their influence is reflected by the bidi’s protected status, alongside chewing tobacco, as one of the cheapest, most lightly regulated and least taxed tobacco products in the world.
India has a 10th of the world’s smokers and is one of the fastest growing tobacco markets. An overwhelming number of India’s smokers, estimated at 100m, puff on the bidi, an unfiltered tightly rolled leaf.
A highly affordable cigarette, it is the bulwark of a uniquely Indian industry with political clout. Yet India introduced legislation three years ago banning smoking in public places, becoming one of a handful of developing countries to crack down on the habit.
Last year the government blocked new foreign investment in the tobacco industry, a move interpreted by foreign companies as protecting local interests.
“On the one hand, we are trying to phase out tobacco from the country, but on the other hand this creates a disincentive for people who are thinking of quitting the tobacco trade . . . because the moment you leave the trade you lose the medical benefits,” said Hemant Goswami of Tobacco Free India, a lobby group. “This medical benefit will keep you in the trade for a lifetime.”
Medical benefits should be extended to all the country’s workers and farmers, not just workers in a single industry, said Mr Goswami.
Mallikariun Kharge, the labour minister, said 1m bidi workers would be brought under the medical cover this financial year.
RIL buys Bharti stake in Axa joint ventures
Reliance Industries on Friday took yet another step of building a financial services empire by agreeing to buy out the Bharti Group from its insurance joint ventures with French insurer Axa.
Sunil Mittals’ Bharti held 74 per cent stake in the insurance ventures, with AXA the balance 26 per cent – the maximum permissible foreign direct investment (FDI) in the Indian insurance space. The acquisition price was not disclosed by both the companies.
According to the proposed deal, which will need clearances from insurance regulator Irda and Competition Commission of India, RIL and its associate Reliance Industrial Infrastructure (RIIL) will have 57 per cent and 17 per cent, respectively, while AXA will continue to have 26 per cent.
Once the FDI limit is raised, AXA will have the option of picking up another 24 per cent from Reliance. "The proposed agreement contemplates an option by which AXA would acquire from RIL and RIIL up to 24 per cent shareholding in both the insurance companies. Upon exercise of such option, RIL will effectively own 45 per cent, RIIL will have 5 per cent and AXA the balance 50 per cent in both the insurance companies,” a communication from RIL said.
The Insurance Amendment Bill, which is awaiting Parliament’s nod for a long time, has proposed a maximum of 49 per cent stake, but RIL sources said the 50 per cent stakeholding proposed for Axa is only an enabling provision and will obviously be bound by the rules of the day.
Bharti on the other hand said the financial services businesses did not fit into the company’s long-term growth plans. “Bharti intends to use the proceeds from selling off its interests in these joint ventures towards other group businesses in India and abroad,” Bharti said in a statement.
Insurance will be the second major sector in which RIL Chairman Mukesh Ambani will directly compete with his younger brother Anil Ambani who owns Reliance Life and Reliance General. RIL’s entry into the insurance sector became possible after the termination of a non-compete clause which was signed during the demerger of Reliance Group in 2005. Reliance Life had recently roped in Japanese insurer Nippon Life by selling 26 per cent stake for Rs 3,062 crore.
Although the companies did not share the deal value, insurance experts said the valuation of the life insurance deal would be much lower than the Reliance-Nippon deal due to Bharti-AXA’s lackluster performance. “It will be surprising if RIL paid a premium to acquire the stake,” said an insurance analyst.
The first year premium of Bharti AXA Life Insurance has dropped 17 per cent to Rs 362 crore in 2010-11. However, gross premium of the general insurance company increased 77 per cent to Rs 550 crore in 2010-11.
Punjab National Bank, the country’s second largest bank, was also in talks with Bharti Axa for its insurance foray. Sources said the bank is now negotiating with two other insurance companies for a paoosible partnership or acquisition.
In March, RIL debuted in the financial services sector by entering into a joint venture with the D.E. Shaw Group, a global investment and technology development firm. The partnership with DE Shaw led to RIL directly competing with Anil Ambani's Reliance Capital in the financial services space.
When contacted, J Hari Narayan, chairman, Insurance Regulatory and Development Authority, said “We are yet to get any formal application from the company. Getting a nod from the regulator will depend on if the acquirer company is found fit to operate in the sector,” he said.
Sunil Mittals’ Bharti held 74 per cent stake in the insurance ventures, with AXA the balance 26 per cent – the maximum permissible foreign direct investment (FDI) in the Indian insurance space. The acquisition price was not disclosed by both the companies.
According to the proposed deal, which will need clearances from insurance regulator Irda and Competition Commission of India, RIL and its associate Reliance Industrial Infrastructure (RIIL) will have 57 per cent and 17 per cent, respectively, while AXA will continue to have 26 per cent.
Once the FDI limit is raised, AXA will have the option of picking up another 24 per cent from Reliance. "The proposed agreement contemplates an option by which AXA would acquire from RIL and RIIL up to 24 per cent shareholding in both the insurance companies. Upon exercise of such option, RIL will effectively own 45 per cent, RIIL will have 5 per cent and AXA the balance 50 per cent in both the insurance companies,” a communication from RIL said.
The Insurance Amendment Bill, which is awaiting Parliament’s nod for a long time, has proposed a maximum of 49 per cent stake, but RIL sources said the 50 per cent stakeholding proposed for Axa is only an enabling provision and will obviously be bound by the rules of the day.
Bharti on the other hand said the financial services businesses did not fit into the company’s long-term growth plans. “Bharti intends to use the proceeds from selling off its interests in these joint ventures towards other group businesses in India and abroad,” Bharti said in a statement.
Insurance will be the second major sector in which RIL Chairman Mukesh Ambani will directly compete with his younger brother Anil Ambani who owns Reliance Life and Reliance General. RIL’s entry into the insurance sector became possible after the termination of a non-compete clause which was signed during the demerger of Reliance Group in 2005. Reliance Life had recently roped in Japanese insurer Nippon Life by selling 26 per cent stake for Rs 3,062 crore.
Although the companies did not share the deal value, insurance experts said the valuation of the life insurance deal would be much lower than the Reliance-Nippon deal due to Bharti-AXA’s lackluster performance. “It will be surprising if RIL paid a premium to acquire the stake,” said an insurance analyst.
The first year premium of Bharti AXA Life Insurance has dropped 17 per cent to Rs 362 crore in 2010-11. However, gross premium of the general insurance company increased 77 per cent to Rs 550 crore in 2010-11.
Punjab National Bank, the country’s second largest bank, was also in talks with Bharti Axa for its insurance foray. Sources said the bank is now negotiating with two other insurance companies for a paoosible partnership or acquisition.
In March, RIL debuted in the financial services sector by entering into a joint venture with the D.E. Shaw Group, a global investment and technology development firm. The partnership with DE Shaw led to RIL directly competing with Anil Ambani's Reliance Capital in the financial services space.
When contacted, J Hari Narayan, chairman, Insurance Regulatory and Development Authority, said “We are yet to get any formal application from the company. Getting a nod from the regulator will depend on if the acquirer company is found fit to operate in the sector,” he said.
'Emerging markets need more coordination'
NEW DELHI: Agustin Carstens, the Mexican central bank chief, was in the Capital to lobby for the top job at IMF. Though he acknowledges that he has a tough task ahead of him, Carstens tells TOI in an interview that he is going to fight till the end. Excerpts:
Q: How is it going for you?
A: It's going well. I had a very good meeting with Prime Minister Manmohan Singh and finance minister Pranab Mukherjee and I managed to discuss issues related to the international financial community, IMF and my candidacy. It was rewarding to know that India is supportive of a merit-based process and will look at my qualifications.
Q: Are you surprised that the developing countries have failed to rally around you despite talking about seeking an end to European and US domination at IMF and the World Bank?
A: It didn't surprise me. It has been a very fast process and the vacancy came up when it was not due. The emerging markets do not have an expedient process like the Europeans. In Europe, they meet every week and discuss issues like these. May be, this is a call to enhance coordination among developing countries. Here, the numbers count by having a candidate supported in a way Lagarde is being supported by Europe. I hope once it's clear that the two main runners will be Lagarde and myself, countries will be able to choose, evaluate and make a decision on merit.
Q: How does India gain by supporting you?
A: I will have a far deeper understanding of India's problems and it will help India to have a stronger voice in the international financial community and the IMF. Besides, Mexico faces problems that are similar to India with high commodity prices and capital flows being the two most pressing issues for both of us. I also understand the frustration of emerging markets of not being adequately heard. So, I will be supportive, understanding and responsive to India's needs.
Q: What are US and Japan saying since they can help you gain votes?
A: No, still it will add up to 24% while Europe has 34%. But with others also going to support me, I am still in the race. It's a tough battle and I am going to be in Washington on Monday before heading to Beijing and Tokyo.
Q: In case you are not getting enough votes, will you withdraw to ensure that the next IMF chief is chosen by consensus?
A: No. Emerging markets have to be serious about this. We should keep trying and put one person to get into a position to get the post. That's why I volunteered. I hope this establishes a precedent and we can take advantage of this in the future.
Q: Will you settle for the first deputy MD's job?
A: I will be happier in Mexico.
Q: How is it going for you?
A: It's going well. I had a very good meeting with Prime Minister Manmohan Singh and finance minister Pranab Mukherjee and I managed to discuss issues related to the international financial community, IMF and my candidacy. It was rewarding to know that India is supportive of a merit-based process and will look at my qualifications.
Q: Are you surprised that the developing countries have failed to rally around you despite talking about seeking an end to European and US domination at IMF and the World Bank?
A: It didn't surprise me. It has been a very fast process and the vacancy came up when it was not due. The emerging markets do not have an expedient process like the Europeans. In Europe, they meet every week and discuss issues like these. May be, this is a call to enhance coordination among developing countries. Here, the numbers count by having a candidate supported in a way Lagarde is being supported by Europe. I hope once it's clear that the two main runners will be Lagarde and myself, countries will be able to choose, evaluate and make a decision on merit.
Q: How does India gain by supporting you?
A: I will have a far deeper understanding of India's problems and it will help India to have a stronger voice in the international financial community and the IMF. Besides, Mexico faces problems that are similar to India with high commodity prices and capital flows being the two most pressing issues for both of us. I also understand the frustration of emerging markets of not being adequately heard. So, I will be supportive, understanding and responsive to India's needs.
Q: What are US and Japan saying since they can help you gain votes?
A: No, still it will add up to 24% while Europe has 34%. But with others also going to support me, I am still in the race. It's a tough battle and I am going to be in Washington on Monday before heading to Beijing and Tokyo.
Q: In case you are not getting enough votes, will you withdraw to ensure that the next IMF chief is chosen by consensus?
A: No. Emerging markets have to be serious about this. We should keep trying and put one person to get into a position to get the post. That's why I volunteered. I hope this establishes a precedent and we can take advantage of this in the future.
Q: Will you settle for the first deputy MD's job?
A: I will be happier in Mexico.
Thursday, June 9, 2011
Markets open on a subdued note
The markets had a soft opening with the Sensex starting lower by 19 points at 18,366 and the Nifty shed 10 points to start at 5,510. In the broader markets, the smallcap index climbed 0.3% while the midcap index added nearly 0.2% outperforming the BSE benchmark index, Sensex down 0.01%.
Among the sectoral indices, Realty, IT and Consumer Durables are leading the gains while FMCG index which was on an upmove started down 1%. Auto, Power and Oil & gas indices were the other indices which started in the negative. Also, the monthly IIP data is expected today.
Overnight in the US market, Wall Street ended higher for the first time in over a week on Thursday, with the Dow and the S&P 500 rising nearly 1%, but many analysts saw the rebound as short-lived. A report showing record U.S. exports in April eased some concerns about a stalled economic recovery, which had been weighing on the market.
The Dow Jones industrial average was up 0.63% at 12,124. The Standard & Poor's 500 Index rose 0.74% at 1,289. The Nasdaq Composite Index 0.35% at 2,685. Meanwhile, brent crude rose 1.5% yesterday reaching a five-week high as OPEC's surprise failure to reach a deal on raising output stoked more fears of leaner supplies later in the year.
In the Asian markets, most of the indices climbed after U.S. trade data gave investors some optimism on the direction of economic growth there. Japan’s Nikkei Stock Average was the top gainer which rallied 1.2%. KLSE Composite and Jakarta Composite gaining 0.3% ecah are some of the other gainers while Straits Times, Seoul Composite are flat with a positive bias. Shanghai Composite, Hang Seng and Taiwan Weighted lost between 0.3-0.7%
The top gainers in the opening trades are Hindalco, TCS, ONGC and Jaiprakash Associates gaining in the range of 0.5-1%
On the other hand, FMCG major, ITC shed 2% followed by Maruti Suzuki, RIL, Bharti Airtel, NTPC and Hindustan Unilever losing between 0.4-1% were the top losers among the Sensex stocks.
The market breadth is positive. Of the total 1375 stocks traded on the BSE, 832 stocks have advanced while 479 declined.
Among the sectoral indices, Realty, IT and Consumer Durables are leading the gains while FMCG index which was on an upmove started down 1%. Auto, Power and Oil & gas indices were the other indices which started in the negative. Also, the monthly IIP data is expected today.
Overnight in the US market, Wall Street ended higher for the first time in over a week on Thursday, with the Dow and the S&P 500 rising nearly 1%, but many analysts saw the rebound as short-lived. A report showing record U.S. exports in April eased some concerns about a stalled economic recovery, which had been weighing on the market.
The Dow Jones industrial average was up 0.63% at 12,124. The Standard & Poor's 500 Index rose 0.74% at 1,289. The Nasdaq Composite Index 0.35% at 2,685. Meanwhile, brent crude rose 1.5% yesterday reaching a five-week high as OPEC's surprise failure to reach a deal on raising output stoked more fears of leaner supplies later in the year.
In the Asian markets, most of the indices climbed after U.S. trade data gave investors some optimism on the direction of economic growth there. Japan’s Nikkei Stock Average was the top gainer which rallied 1.2%. KLSE Composite and Jakarta Composite gaining 0.3% ecah are some of the other gainers while Straits Times, Seoul Composite are flat with a positive bias. Shanghai Composite, Hang Seng and Taiwan Weighted lost between 0.3-0.7%
The top gainers in the opening trades are Hindalco, TCS, ONGC and Jaiprakash Associates gaining in the range of 0.5-1%
On the other hand, FMCG major, ITC shed 2% followed by Maruti Suzuki, RIL, Bharti Airtel, NTPC and Hindustan Unilever losing between 0.4-1% were the top losers among the Sensex stocks.
The market breadth is positive. Of the total 1375 stocks traded on the BSE, 832 stocks have advanced while 479 declined.
PSBs seek to scale up presence in Africa
Following the government’s push to increase trade between India and African countries and the growing investments by Indian companies in the African continent, public sector banks are scaling up their presence in African countries by opening new branches and subsidiaries.
State Bank of India (SBI) plans to open four new branches in South Africa. The bank already has four branches in that country, including those in Durban and Cape Town. SBI's business in South Africa was mostly corporate-driven till now. However, the bank is gradually getting into the retail segment as well, said an SBI official. SBI also plans to open a subsidiary in Botswana. Currently, the bank is present in Nigeria, through its stake in Sterling Bank.
Usually, banks take the subsidiary route to scale up their presence, since local banking regulators prefer this model, as it offers easy supervising operations and an easier method to evaluate risks. If banks use the branch route, the banking regulator would have to monitor the entire bank, which is a tough task for a regulator in a small country with limited means.
INDIAN BANKS’ AFRICAN SAFARI
SBI to set up subsidiary in Botswana and four new branches in South Africa
BoI to set up subsidiary in Uganda, office in Botswana
Central Bank of India to set up a subsidiary in Mozambique
Bank of Baroda will open more branches in South Africa and Kenya
The current expansion plans of banks can be seen as the second wave of banks increasing their presence in Africa. Bank of India and Bank of Baroda had established their presence in Africa in the middle of the last century to serve the Indian trading community and migrant workers. However, the focus now would be to expand and cater to Indian companies investing in mineral, energy resources and infrastructure in Africa. And this time, the scale is different, with large mergers and acquisitions and green-field investments being the flavour of the day. Bharati Enterprises' $9-billion acquisition in African telecom player Zain can be cited as an example.
However, an important question is whether Indian banks would be able to provide adequate financial support. A senior official with Export-Import Bank of India said Indian banks lack the scale for a large exposure in fundings for mergers and acquisitions. Global banks, which enjoy large balance sheets, are likely to play the leading role.
A Bank of Baroda official said when it came to arranging funds, the absence of a branch network was not a concern. With a strong presence in international finance, Indian banks could raise funds through bonds to finance Indian companies, he said.
Bank of Baroda General Manager (international banking) V H Thatte said the bank had branches in South Africa and worked through subsidiaries in countries like Uganda and Kenya.
Bank of India Executive Director B A Prabhakar said the bank intended to open a subsidiary in Uganda. It had also applied for the approval to set up an office in Botswana. The bank may, in the future, consider converting its branch operations in Kenya into a subsidiary.
Another Mumbai-based lender, Central Bank of India, would set up a subsidiary in Mozambique. The bank has signed a pact with an African company for a joint venture in the banking sector involving an investment of $10 million. The operations would start once the Reserve Bank of India approved the project.
State Bank of India (SBI) plans to open four new branches in South Africa. The bank already has four branches in that country, including those in Durban and Cape Town. SBI's business in South Africa was mostly corporate-driven till now. However, the bank is gradually getting into the retail segment as well, said an SBI official. SBI also plans to open a subsidiary in Botswana. Currently, the bank is present in Nigeria, through its stake in Sterling Bank.
Usually, banks take the subsidiary route to scale up their presence, since local banking regulators prefer this model, as it offers easy supervising operations and an easier method to evaluate risks. If banks use the branch route, the banking regulator would have to monitor the entire bank, which is a tough task for a regulator in a small country with limited means.
INDIAN BANKS’ AFRICAN SAFARI
SBI to set up subsidiary in Botswana and four new branches in South Africa
BoI to set up subsidiary in Uganda, office in Botswana
Central Bank of India to set up a subsidiary in Mozambique
Bank of Baroda will open more branches in South Africa and Kenya
The current expansion plans of banks can be seen as the second wave of banks increasing their presence in Africa. Bank of India and Bank of Baroda had established their presence in Africa in the middle of the last century to serve the Indian trading community and migrant workers. However, the focus now would be to expand and cater to Indian companies investing in mineral, energy resources and infrastructure in Africa. And this time, the scale is different, with large mergers and acquisitions and green-field investments being the flavour of the day. Bharati Enterprises' $9-billion acquisition in African telecom player Zain can be cited as an example.
However, an important question is whether Indian banks would be able to provide adequate financial support. A senior official with Export-Import Bank of India said Indian banks lack the scale for a large exposure in fundings for mergers and acquisitions. Global banks, which enjoy large balance sheets, are likely to play the leading role.
A Bank of Baroda official said when it came to arranging funds, the absence of a branch network was not a concern. With a strong presence in international finance, Indian banks could raise funds through bonds to finance Indian companies, he said.
Bank of Baroda General Manager (international banking) V H Thatte said the bank had branches in South Africa and worked through subsidiaries in countries like Uganda and Kenya.
Bank of India Executive Director B A Prabhakar said the bank intended to open a subsidiary in Uganda. It had also applied for the approval to set up an office in Botswana. The bank may, in the future, consider converting its branch operations in Kenya into a subsidiary.
Another Mumbai-based lender, Central Bank of India, would set up a subsidiary in Mozambique. The bank has signed a pact with an African company for a joint venture in the banking sector involving an investment of $10 million. The operations would start once the Reserve Bank of India approved the project.
FIIs to petition Sebi on new IDR norm
Say it’s an abrupt U-turn, RBI’s Dec clarification said no prior approval needed after a year for conversion into shares
The capital market regulator's recent decision of not allowing fungibility of frequently traded Indian Depository Receipts (IDRs) is set to become a major issue.
Some leading foreign institutional investors (FIIs) and hedge funds that hold Standard Chartered’s IDRs in their portfolio intend to take up this matter with the regulator. They allege the regulators have done an abrupt U-turn after "indicating" for months that fungibility would be allowed after one year of listing.
The root of the matter is a Sebi circular issued last week. It said after the completion of a year from the date of issuance, redemption of IDRs shall be permitted only if these are infrequently traded on the stock exchange(s) in India. This means StandardChart’s IDR holders will not get a chance to convert their holdings into underlying shares after the completion of a year after listing, as these instruments are liquid by Sebi’s criterion.
Currently, StanChart is the only entity that has listed its IDR on the Indian bourses. The impact of Sebi’s direction was clearly visible on Monday, the first trading session after the Sebi circular. The IDRs tanked 20 per cent during the day, to touch an all-time low of Rs 91.75. StanChart IDRs, issued at Rs 104, closed at Rs 95.25 today on the Bombay Stock Exchange.
According to persons with direct knowledge of the matter, some high-profile law firms are currently working on representations likely to be made to the Securities and Exchange Board of India (Sebi) by early next week. One demand is to implement the new norms for companies that list their IDRs in future. Some foreign investors are believed to have already made representations to Sebi.
“We will tell the regulator not to impose the new norms on companies that have already listed their IDRs in India. It should not be with retrospective effect,” said a person familiar with the matter.
RBI impression
The institutional investors are also miffed due to the fact that a Reserve Bank of India (RBI) clarification (in response to a query by some investors) in December 2010 had said that no prior approval would be required to convert IDRs into underlying shares after one year of listing. RBI had not said there would be a “liquidity criterion” applied.
After the clarification, many FIIs and hedge funds structured their deals so as to convert the IDRs into StanChart equity shares after one year of listing, which would be June 10. The IDRs typically traded at an eight to 12 per cent discount to the StanChart shares listed on stock exchanges in London and Hong Kong.
“The clarification was sought in December from the central bank as the one-year period was approaching in some months and institutional investors wanted to place a bet based on the regulatory stand,” said a person privy to the matter. “The RBI did not even indicate that fungibility will not be allowed. In fact the clarification clearly stated that IDRs could be converted into equity shares after one year without RBI approval. This is a complete U-turn.”
In May 2010, when the country's first IDR issue was launched, it was clarified in the prospectus that Sebi and RBI norms state that “automatic fungibility of IDRs is not permitted” though “fungibility of IDRs into the underlying shares would be permitted only after the expiry of the one year period from the date of issue of the IDRs and subsequent to obtaining RBI approval on a case-by-case basis”.
A section of market players say the Sebi stand on non-fungibility of IDRs could stem from the fact that the foreign holding in the instrument was around 70 per cent and allowing such investors to convert IDRs into equity shares would have led to a conversion spree. Incidentally, US and European regulations allow fungibility of American Depository Receipts and Global Depository Receipts, respectively.
The capital market regulator's recent decision of not allowing fungibility of frequently traded Indian Depository Receipts (IDRs) is set to become a major issue.
Some leading foreign institutional investors (FIIs) and hedge funds that hold Standard Chartered’s IDRs in their portfolio intend to take up this matter with the regulator. They allege the regulators have done an abrupt U-turn after "indicating" for months that fungibility would be allowed after one year of listing.
The root of the matter is a Sebi circular issued last week. It said after the completion of a year from the date of issuance, redemption of IDRs shall be permitted only if these are infrequently traded on the stock exchange(s) in India. This means StandardChart’s IDR holders will not get a chance to convert their holdings into underlying shares after the completion of a year after listing, as these instruments are liquid by Sebi’s criterion.
Currently, StanChart is the only entity that has listed its IDR on the Indian bourses. The impact of Sebi’s direction was clearly visible on Monday, the first trading session after the Sebi circular. The IDRs tanked 20 per cent during the day, to touch an all-time low of Rs 91.75. StanChart IDRs, issued at Rs 104, closed at Rs 95.25 today on the Bombay Stock Exchange.
According to persons with direct knowledge of the matter, some high-profile law firms are currently working on representations likely to be made to the Securities and Exchange Board of India (Sebi) by early next week. One demand is to implement the new norms for companies that list their IDRs in future. Some foreign investors are believed to have already made representations to Sebi.
“We will tell the regulator not to impose the new norms on companies that have already listed their IDRs in India. It should not be with retrospective effect,” said a person familiar with the matter.
RBI impression
The institutional investors are also miffed due to the fact that a Reserve Bank of India (RBI) clarification (in response to a query by some investors) in December 2010 had said that no prior approval would be required to convert IDRs into underlying shares after one year of listing. RBI had not said there would be a “liquidity criterion” applied.
After the clarification, many FIIs and hedge funds structured their deals so as to convert the IDRs into StanChart equity shares after one year of listing, which would be June 10. The IDRs typically traded at an eight to 12 per cent discount to the StanChart shares listed on stock exchanges in London and Hong Kong.
“The clarification was sought in December from the central bank as the one-year period was approaching in some months and institutional investors wanted to place a bet based on the regulatory stand,” said a person privy to the matter. “The RBI did not even indicate that fungibility will not be allowed. In fact the clarification clearly stated that IDRs could be converted into equity shares after one year without RBI approval. This is a complete U-turn.”
In May 2010, when the country's first IDR issue was launched, it was clarified in the prospectus that Sebi and RBI norms state that “automatic fungibility of IDRs is not permitted” though “fungibility of IDRs into the underlying shares would be permitted only after the expiry of the one year period from the date of issue of the IDRs and subsequent to obtaining RBI approval on a case-by-case basis”.
A section of market players say the Sebi stand on non-fungibility of IDRs could stem from the fact that the foreign holding in the instrument was around 70 per cent and allowing such investors to convert IDRs into equity shares would have led to a conversion spree. Incidentally, US and European regulations allow fungibility of American Depository Receipts and Global Depository Receipts, respectively.
BSE allows trading in 135 more stocks in F&O
MUMBAI: The Bombay Stock Exchange (BSE) will add 135 stocks to its futures and options segment from August 2011, following a recent regulatory move to allow bourses to offer incentives to brokers for generating volumes in illiquid derivatives contracts. The step has raised hopes of reviving the BSE's near-dormant F&O segment.
"With recent positive developments designed to augment trading in F&O, we are working towards making the BSE market-ready for increased participation in our equity derivatives business," said the exchange's CEO, Madhu Kannan, in a release.
The BSE has 84 stocks in addition to a few indices in its F&O segment, which clocked an average daily turnover of Rs 18 crore in the past one month. In comparison, the NSE's average daily turnover was Rs 1 lakh crore in the period.
Brokers said the so-called liquidity enhancement scheme presents an opportunity for the BSE to capture a portion of its rival's dominant market share.
"The chance of a revival of the BSE's equity derivatives segment has been enchanced 100-fold after the introduction of the liquidity enhancement scheme," said Rajesh Baheti, MD, Crosseas Capital. "Though the scheme may not be a success immediately, it is certainly promising as liquidity begets liquidity," he said. Brokers said even the NSE may benefit from the liquidity enhancement schemes.
"With recent positive developments designed to augment trading in F&O, we are working towards making the BSE market-ready for increased participation in our equity derivatives business," said the exchange's CEO, Madhu Kannan, in a release.
The BSE has 84 stocks in addition to a few indices in its F&O segment, which clocked an average daily turnover of Rs 18 crore in the past one month. In comparison, the NSE's average daily turnover was Rs 1 lakh crore in the period.
Brokers said the so-called liquidity enhancement scheme presents an opportunity for the BSE to capture a portion of its rival's dominant market share.
"The chance of a revival of the BSE's equity derivatives segment has been enchanced 100-fold after the introduction of the liquidity enhancement scheme," said Rajesh Baheti, MD, Crosseas Capital. "Though the scheme may not be a success immediately, it is certainly promising as liquidity begets liquidity," he said. Brokers said even the NSE may benefit from the liquidity enhancement schemes.
Sensex marginally down; factory data awaited
MUMBAI: Indian markets dropped 0.1 percent in early trade on Friday, amid subdued Asian peers and ahead of factory data due by 0530 GMT.
Industrial output in Asia's third-largest economy probably rose 5.5 percent in April from a year earlier, moderated by successive interest rate rises which slowed manufacturing growth, the median forecast in a Reuters poll showed.
At 9:17 a.m. (0347 GMT), the 30-share BSE index was down 0.06 percent at 18,373.99 points, with 13 components declining. It had started higher.
The 50-share NSE index was down 0.1 percent at 5,514.50.
Industrial output in Asia's third-largest economy probably rose 5.5 percent in April from a year earlier, moderated by successive interest rate rises which slowed manufacturing growth, the median forecast in a Reuters poll showed.
At 9:17 a.m. (0347 GMT), the 30-share BSE index was down 0.06 percent at 18,373.99 points, with 13 components declining. It had started higher.
The 50-share NSE index was down 0.1 percent at 5,514.50.
'20km of highway to be built daily before 2014'
NEW DELHI: Road transport and highways minister C P Joshi said on Thursday the government would deliver on the pledge of constructing 20km of highway per day by the next parliamentary polls. On Wednesday, the Prime Minister had asked the ministry to expedite both awarding of projects and the pace of construction.
UPA-I had drawn flak for derailing the NH development in comparison to the NDA era.
"The road projects we have awarded we are going to award in this fiscal are likely to be completed in the next three years. The PM has also asked us to prepare detailed project report (DPR) for 15,000 km per year to ensure that bidding does not gets hampered due to lack of our preparation," Joshi said. He added that the PM has assured him to provide necessary fund for expediting the road work.
UPA-I had drawn flak for derailing the NH development in comparison to the NDA era.
"The road projects we have awarded we are going to award in this fiscal are likely to be completed in the next three years. The PM has also asked us to prepare detailed project report (DPR) for 15,000 km per year to ensure that bidding does not gets hampered due to lack of our preparation," Joshi said. He added that the PM has assured him to provide necessary fund for expediting the road work.
NHAI earns 824cr from projects
NEW DELHI: The National Highway Authority of India (NHAI) has earned Rs 823.5 crore from awarding projects in the last four months as companies have offered a premium over the bid amount for many projects instead of taking the government aid in the form of viability gap funding (VGF).
The authority has projected that the saving could swell to Rs 31,352 crore over 20-25 years, as instead of offering grant or VGF the body has received more money from the bidders. However, the net present value (NPV) of the saving is pegged at Rs 7,877.82crore. All the five projects which have gone for premium fall under the build-operate-transfer (BOT) toll category. Road transport and highways minister C P Joshi presented the rosy figure at the department's review meeting on Wednesday that was chaired by Prime Minister Manmohan Singh. "We've arrived at the expected savings based on calculations. This is a good sign for the sector . We're getting good number of bids for several other projects ," Joshi said.
NHAI officials attributed that the saving could be higher considering in several other projects the private developers have sought less annuity amount than the projection of PPP Appraisal Committee (PPPAC) and Cabinet Committee on Infrastructure (CCI). For BOT annuity projects, the NHAI pays back the entire project cost with interest to the private developer in a staggered manner. "We have not yet calculated how much we have saved so far in annuity projects. There is almost similar trend for several other projects that have received bids in the past one month," said an official NHAI. He added that the sector has shown signs of recovery since September-October 2010. Sources said the projects are going for premium because of high traffic growth.
The PPPAC or CCI projects the annual traffic growth at about 5%. "But the bidders know the trend. The annual growth of traffic on national highways is at least 7%. No wonder, they are taking a calculated risk. In few cases, local players have quoted high premium . It shows that they are aware of the ground realities," said an official.
The authority has projected that the saving could swell to Rs 31,352 crore over 20-25 years, as instead of offering grant or VGF the body has received more money from the bidders. However, the net present value (NPV) of the saving is pegged at Rs 7,877.82crore. All the five projects which have gone for premium fall under the build-operate-transfer (BOT) toll category. Road transport and highways minister C P Joshi presented the rosy figure at the department's review meeting on Wednesday that was chaired by Prime Minister Manmohan Singh. "We've arrived at the expected savings based on calculations. This is a good sign for the sector . We're getting good number of bids for several other projects ," Joshi said.
NHAI officials attributed that the saving could be higher considering in several other projects the private developers have sought less annuity amount than the projection of PPP Appraisal Committee (PPPAC) and Cabinet Committee on Infrastructure (CCI). For BOT annuity projects, the NHAI pays back the entire project cost with interest to the private developer in a staggered manner. "We have not yet calculated how much we have saved so far in annuity projects. There is almost similar trend for several other projects that have received bids in the past one month," said an official NHAI. He added that the sector has shown signs of recovery since September-October 2010. Sources said the projects are going for premium because of high traffic growth.
The PPPAC or CCI projects the annual traffic growth at about 5%. "But the bidders know the trend. The annual growth of traffic on national highways is at least 7%. No wonder, they are taking a calculated risk. In few cases, local players have quoted high premium . It shows that they are aware of the ground realities," said an official.
Wednesday, June 8, 2011
Markets open flat
The markets had a quiet opening with the Sensex down four points at 18,394 while the Nifty opened virtually unchanged from yesterday's closing at 5,525. The broader markets, too opened flat but were better off than the BSE benchmark index. The smallcap and the midcap indices started 0.2% higher as compared to the Sensex gaining nearly 0.1% in the opening trades.
In the international markets, US markets extended losses for the sixth straight day on Wednesday as investors worried that a slowing economy could deepen the market's retreat. The Dow Jones industrial average dropped 0.18% to 12,049. The Standard & Poor's 500 Index lost 0.4% to 1,279. The Nasdaq Composite Index fell 0.97% to 2,675.
Asian stocks too slipped for a sixth straight day as investors cut exposure to risky assets on signs the global economy is losing steam, even as oil prices and the high-yielding Australian dollar pushed higher. The Nikkei Stock Average was down 0.3% as strengthening Yen weighed on the exporter shares. The Hang Seng Index slipped 0.2% and Shanghai Composite lost 0.2%. KLSE Composite and Taiwan Weighted were the only indices in the green up 0.15% each.
Back home, all the sectoral indices started in the green except the IT index. Consumer Durables and Realty up 0.3% each were the major gainers in the opening trades followed by Oil & Gas and Health Care.The movers in the Consumer Durables space were Whirlpool up 3% followed by Videocon Industries and Rajesh Exports adding 1% each.
The top gainers among the Sensex stocks in the opening trades were Hero Honda up nearly 1% followed by BHEL, TCS, RIL and NTPC adding 0.7% each.
Reliance Communication down 1% was the top loser after yesterday stellar run. Maruti Suzuki, Cipla, Reliance Infrastructure, Tata Power and Tata Motors down 0.2 - 0.6% were the other major losers.
The market breadth wass positive. Of the total 1427 stocks traded on the BSE, 953 stocks advanced while 420 declined.
In the international markets, US markets extended losses for the sixth straight day on Wednesday as investors worried that a slowing economy could deepen the market's retreat. The Dow Jones industrial average dropped 0.18% to 12,049. The Standard & Poor's 500 Index lost 0.4% to 1,279. The Nasdaq Composite Index fell 0.97% to 2,675.
Asian stocks too slipped for a sixth straight day as investors cut exposure to risky assets on signs the global economy is losing steam, even as oil prices and the high-yielding Australian dollar pushed higher. The Nikkei Stock Average was down 0.3% as strengthening Yen weighed on the exporter shares. The Hang Seng Index slipped 0.2% and Shanghai Composite lost 0.2%. KLSE Composite and Taiwan Weighted were the only indices in the green up 0.15% each.
Back home, all the sectoral indices started in the green except the IT index. Consumer Durables and Realty up 0.3% each were the major gainers in the opening trades followed by Oil & Gas and Health Care.The movers in the Consumer Durables space were Whirlpool up 3% followed by Videocon Industries and Rajesh Exports adding 1% each.
The top gainers among the Sensex stocks in the opening trades were Hero Honda up nearly 1% followed by BHEL, TCS, RIL and NTPC adding 0.7% each.
Reliance Communication down 1% was the top loser after yesterday stellar run. Maruti Suzuki, Cipla, Reliance Infrastructure, Tata Power and Tata Motors down 0.2 - 0.6% were the other major losers.
The market breadth wass positive. Of the total 1427 stocks traded on the BSE, 953 stocks advanced while 420 declined.
Asia's oldest exchange gets cheaper
As volumes dip, BSE’s shares slump 38 per cent in 6 months; trade in kerb deals at Rs 190-200 a share.
Bombay Stock Exchange (BSE) shares have lost more than a third of their value in the last six months, as a lacklustre market has hurt volumes in the exchange’s cash segment and several efforts to revive its derivatives segment are yet to show results.
The Bimal Jalan panel’s recommendation to not allow listing of stock exchanges and cap their profits has also created uncertainly among investors, resulting in a lower valuation of BSE, brokers say.
Shares of Asia’s oldest stock exchange are changing hands at Rs 190-200 a share in the unofficial market, about 38 per cent lower than six months before, according to brokers dealing in shares of unlisted companies. In December last year, deals were happening in BSE shares around Rs 325 a share.
Going by trades in the unofficial market, BSE’s valuation has fallen about 47 per cent in less than a year. In August last year, billionaire investor George Soros’s Quantum hedge fund had picked up a 4 per cent stake in BSE for around Rs 375-380 a share, valuing the bourse at Rs 3,965.54 crore ($881 million). At Rs 200 a share, the bourse is now valued at Rs 2,114.95 crore ($470 million).
In contrast, shares of BSE’s larger rival National Stock Exchange (NSE) have been relatively stable in the unofficial market and are available at around Rs 4,000 a share at present, according to brokers. However, unlike BSE, where its broker-members own 44 per cent stake in the exchange, NSE shares are largely held by institutions and are not frequently traded in the unofficial market.
At Rs 4,000 a share, NSE is valued at Rs 18,000 crore ($4 billion). In November last year, the Jignesh Shah-promoted Financial Technologies had sold 4,40,000 NSE shares at Rs 3,800 a share, which valued the exchange at Rs 17,100 crore ($3.8 billion).
Both BSE and NSE declined to comment.
The aggregate monthly turnover in BSE’s cash segment has declined 27.14 per cent to Rs 59,389.80 crore in May from Rs 81,519.92 crore in December 2010, according to data compiled by BS Research Bureau. The exchange’s market share in the cash segment has fallen to 20.31 per cent in May from 21.65 per cent in December last year.
Lack of interest from market participants has reduced the turnover in the cash segment of BSE’s larger rival NSE, too. The aggregate monthly turnover in NSE’s cash segment has dropped nearly 21 per cent to Rs 2,33,015.72 crore in May from Rs 2,94,942.93 crore in December 2010.
BSE’s efforts to infuse life in its moribund derivatives segment have also not yielded results so far. In the last two years, the exchange has taken several steps like changing the expiry schedule for stock and index derivatives, slashing membership fee and introducing delivery-based settlement, among others. The exchange’s derivatives segment clocked an aggregate monthly turnover of Rs 44.05 crore in May compared with Rs 12.92 crore in December last year. The aggregate monthly turnover in NSE’s derivatives segment increased 10.52 per cent to Rs 26,05,137.81 crore in May from Rs 23,57,108.95 crore in December 2010.
Bombay Stock Exchange (BSE) shares have lost more than a third of their value in the last six months, as a lacklustre market has hurt volumes in the exchange’s cash segment and several efforts to revive its derivatives segment are yet to show results.
The Bimal Jalan panel’s recommendation to not allow listing of stock exchanges and cap their profits has also created uncertainly among investors, resulting in a lower valuation of BSE, brokers say.
Shares of Asia’s oldest stock exchange are changing hands at Rs 190-200 a share in the unofficial market, about 38 per cent lower than six months before, according to brokers dealing in shares of unlisted companies. In December last year, deals were happening in BSE shares around Rs 325 a share.
Going by trades in the unofficial market, BSE’s valuation has fallen about 47 per cent in less than a year. In August last year, billionaire investor George Soros’s Quantum hedge fund had picked up a 4 per cent stake in BSE for around Rs 375-380 a share, valuing the bourse at Rs 3,965.54 crore ($881 million). At Rs 200 a share, the bourse is now valued at Rs 2,114.95 crore ($470 million).
In contrast, shares of BSE’s larger rival National Stock Exchange (NSE) have been relatively stable in the unofficial market and are available at around Rs 4,000 a share at present, according to brokers. However, unlike BSE, where its broker-members own 44 per cent stake in the exchange, NSE shares are largely held by institutions and are not frequently traded in the unofficial market.
At Rs 4,000 a share, NSE is valued at Rs 18,000 crore ($4 billion). In November last year, the Jignesh Shah-promoted Financial Technologies had sold 4,40,000 NSE shares at Rs 3,800 a share, which valued the exchange at Rs 17,100 crore ($3.8 billion).
Both BSE and NSE declined to comment.
The aggregate monthly turnover in BSE’s cash segment has declined 27.14 per cent to Rs 59,389.80 crore in May from Rs 81,519.92 crore in December 2010, according to data compiled by BS Research Bureau. The exchange’s market share in the cash segment has fallen to 20.31 per cent in May from 21.65 per cent in December last year.
Lack of interest from market participants has reduced the turnover in the cash segment of BSE’s larger rival NSE, too. The aggregate monthly turnover in NSE’s cash segment has dropped nearly 21 per cent to Rs 2,33,015.72 crore in May from Rs 2,94,942.93 crore in December 2010.
BSE’s efforts to infuse life in its moribund derivatives segment have also not yielded results so far. In the last two years, the exchange has taken several steps like changing the expiry schedule for stock and index derivatives, slashing membership fee and introducing delivery-based settlement, among others. The exchange’s derivatives segment clocked an aggregate monthly turnover of Rs 44.05 crore in May compared with Rs 12.92 crore in December last year. The aggregate monthly turnover in NSE’s derivatives segment increased 10.52 per cent to Rs 26,05,137.81 crore in May from Rs 23,57,108.95 crore in December 2010.
Oil marketing cos' shares down on firm global crude
Shares of state-run oil marketing companies were trading lower on higher global crude prices after the Organization of the Petroleum Exporting Countries failed to reach a deal to boost output, several dealers said.
At 9.23 a.m., shares of Indian Oil Corp. , Hindustan Petroleum Corp. and Bharat Petroleum Corp. were down 1.5-2 percent.
At 9.23 a.m., shares of Indian Oil Corp. , Hindustan Petroleum Corp. and Bharat Petroleum Corp. were down 1.5-2 percent.
Competition makes stock selection risky in China and India: JPMorgan
Adrian Mowat , chief strategist at JPMorgan Securities for the Asia-Pacific region, spoke exclusively to ET NOW on a variety of issues that are constricting global growth and where the smart money is moving into.
How are you reading global economic data, especially inflation?
People are spending on groceries and gasoline and that's what is depressing the demand for other goods and services. It is causing weakness in US and European economic data. We need to lower energy and commodity prices to reaccelerate demand in the developed world. We remain bearish on commodities and global economic data is weak. We are revising down our forecast for both developed and emerging economies. Commodity prices need to come down reflecting weaker demand.
Where do you think the smart money is moving into? Which sectors and economies are likely to be in favour?
We are looking to buy some of the most cyclical sectors which currently are very underweight in most portfolios. We will be looking at the financial space, some of the consumer stocks , even auto stocks which at the moment are underweight becausethey are experiencing relatively weak demand and supply in the coming months. Telecom should be defensive, but in emerging markets like China and India, the competitive environment makes the stock selection extremely high risk.
What is your view on India?
We are overweight on India against a backdrop of pessimism on EMs. Many investors understand the negatives in investing in India whether that be persistently high inflation, political problems and margin pressure. So, India's outperformance is certainly in line at this point in time. If we were to see a broader selloff at the US equity market, as investors have eventually capitulated to weak data. You will see EMs to move downwards with that and a correction of 10% is quite possible.
Still, if you were to construct a portfolio of Indian stocks, what would you include?
For now, your best bet is to stick with high quality liquid names like consumer staples space in India are attractive on that basis as are the private sector banks. They are the right things to be earning today. Reasonably, open minded to buy capital goods companies at this point in India.
Quantitative Easing of US Fed comes to a close, what does it mean?
End of QE2 could turn out to be dollarpositive. Japan's economy desperately needs a weaker yen. So, when I look into the 2nd half of the year, it is quite possible that the dollar could appreciate. Earnings numbers will reduce in China, including for banks and so construct in overweight portfolios is quite difficult.
How are you reading global economic data, especially inflation?
People are spending on groceries and gasoline and that's what is depressing the demand for other goods and services. It is causing weakness in US and European economic data. We need to lower energy and commodity prices to reaccelerate demand in the developed world. We remain bearish on commodities and global economic data is weak. We are revising down our forecast for both developed and emerging economies. Commodity prices need to come down reflecting weaker demand.
Where do you think the smart money is moving into? Which sectors and economies are likely to be in favour?
We are looking to buy some of the most cyclical sectors which currently are very underweight in most portfolios. We will be looking at the financial space, some of the consumer stocks , even auto stocks which at the moment are underweight becausethey are experiencing relatively weak demand and supply in the coming months. Telecom should be defensive, but in emerging markets like China and India, the competitive environment makes the stock selection extremely high risk.
What is your view on India?
We are overweight on India against a backdrop of pessimism on EMs. Many investors understand the negatives in investing in India whether that be persistently high inflation, political problems and margin pressure. So, India's outperformance is certainly in line at this point in time. If we were to see a broader selloff at the US equity market, as investors have eventually capitulated to weak data. You will see EMs to move downwards with that and a correction of 10% is quite possible.
Still, if you were to construct a portfolio of Indian stocks, what would you include?
For now, your best bet is to stick with high quality liquid names like consumer staples space in India are attractive on that basis as are the private sector banks. They are the right things to be earning today. Reasonably, open minded to buy capital goods companies at this point in India.
Quantitative Easing of US Fed comes to a close, what does it mean?
End of QE2 could turn out to be dollarpositive. Japan's economy desperately needs a weaker yen. So, when I look into the 2nd half of the year, it is quite possible that the dollar could appreciate. Earnings numbers will reduce in China, including for banks and so construct in overweight portfolios is quite difficult.
PAN card must to purchase jewellery worth over Rs 5 lakh
BANGALORE: In an attempt to combat black money, the Centre has made it compulsory to submit permanent account number (PAN) for purchase of jewellery or bullion exceeding Rs 5 lakh . The rule of quoting PAN will also apply to those who avail debit cards from banks . The Central Board of Direct Taxes (CBDT) and the Income Tax Department have issued a notification amending the rules.
This amendment will come into effect from July 1, 2011. The CBDT and IT department has already sent a communication to all jewellery dealers, bullion traders, nationalised and private banks which are distributing debitcards.
CBDT has now incorporated four new transactionsunder Rule114Bof theIncome Tax Act which will require PAN for these transactions. The rule also stated that the PAN number is necessary for use of debit card, insurance payments exceeding Rs 50,000 a year, buying jewellery or bullion exceeding Rs 5 lakh.
As per the old act PAN was compulsory for getting a credit card. The new amended provision under rule 114B (ii) was inserted for issue of a credit or debit card after quoting PAN. At present any withdrawal of more than Rs 50,000 in a single purchase or issue of cheque for Rs 50,000 needed PAN. Now payment of Rs 50,000 or more in a year as life insurance premium will also require PAN. "It is good from the view point of the country's economic development but we fear the new rule will create inconvenience for our business and daily transactions," S Venkatesh Babu , secretary , Bangalore Jewellery Association, said .
This amendment will come into effect from July 1, 2011. The CBDT and IT department has already sent a communication to all jewellery dealers, bullion traders, nationalised and private banks which are distributing debitcards.
CBDT has now incorporated four new transactionsunder Rule114Bof theIncome Tax Act which will require PAN for these transactions. The rule also stated that the PAN number is necessary for use of debit card, insurance payments exceeding Rs 50,000 a year, buying jewellery or bullion exceeding Rs 5 lakh.
As per the old act PAN was compulsory for getting a credit card. The new amended provision under rule 114B (ii) was inserted for issue of a credit or debit card after quoting PAN. At present any withdrawal of more than Rs 50,000 in a single purchase or issue of cheque for Rs 50,000 needed PAN. Now payment of Rs 50,000 or more in a year as life insurance premium will also require PAN. "It is good from the view point of the country's economic development but we fear the new rule will create inconvenience for our business and daily transactions," S Venkatesh Babu , secretary , Bangalore Jewellery Association, said .
Rate war over, cell tariffs set to rise
BANGALORE: A single naya paisa is still buying-power in India, if you are shopping for talk-time. Indeed, air-time is the cheapest commodity in the country now. But the days of falling mobile tariffs may be at its end.
"The price war is over," declared a senior official of a leading telecom operator , who did not want to be named. "Air-time prices have touched rock bottom and no imagination or innovation can help it go down further. Now it can be only a scheme where subscribers are paid for the calls they make. That will be suicidal."
Suresh Kumar, COO of Karnataka & Andhra Pradesh circles in MTS India , says voice tariff has hit a trough. "We already offer tariffs at half a paisa per second," he said, indicating it can't get better for customers. Atul Bindal, president (mobile services) in Bharti Airtel, says the company had always believed that the price war couldn't last. "It is unrealistic and uneconomical . Some operators have been offering prices much below the marginal cost of a call.'' The mobile telephony industry has been going through a difficult period , with low revenue growth, high pressure on margins, huge investments in 3G infrastructure and the 2G scam.
The year 2009-10 was bad for the entire industry, with an average revenue growth of about 5%. In 2010-11 , with greater stability in tariffs and growth in VAS (value added services) and data services, the revenue growth is estimated to be 10% to 12%.
Bharti Airtel's net profit declined by 31% in the last quarter, Reliance Communications suffered a net loss of Rs 758 crore in the last financial year. Some think that these pressures will push prices up.
"Over the next two years, operators will have to focus on customer delight and service innovation. This will result in higher input costs which may result in tariffs moving northwards," says Prashant Singhal, telecom industry leader in consulting firm Ernst & Young. Hemant Joshi, partner (telecom practice), in consultancy firm Deloitte Haskins & Sells, says operators might introduce offerings with assured uptime and quality at differential pricing. "In developed markets such pricing already exists for data products," he says.
V Venkatesh of Chith Consulting, a Bangalore-based business strategy consulting firm, says providers might withdraw some of their unviable, highly incentivized packages and discontinue certain tariff plans once the validity period is over.
He says focusing on non-voice and better ARPUs (average revenue per user) would help industry improve its revenue growth rate.
"The price war is over," declared a senior official of a leading telecom operator , who did not want to be named. "Air-time prices have touched rock bottom and no imagination or innovation can help it go down further. Now it can be only a scheme where subscribers are paid for the calls they make. That will be suicidal."
Suresh Kumar, COO of Karnataka & Andhra Pradesh circles in MTS India , says voice tariff has hit a trough. "We already offer tariffs at half a paisa per second," he said, indicating it can't get better for customers. Atul Bindal, president (mobile services) in Bharti Airtel, says the company had always believed that the price war couldn't last. "It is unrealistic and uneconomical . Some operators have been offering prices much below the marginal cost of a call.'' The mobile telephony industry has been going through a difficult period , with low revenue growth, high pressure on margins, huge investments in 3G infrastructure and the 2G scam.
The year 2009-10 was bad for the entire industry, with an average revenue growth of about 5%. In 2010-11 , with greater stability in tariffs and growth in VAS (value added services) and data services, the revenue growth is estimated to be 10% to 12%.
Bharti Airtel's net profit declined by 31% in the last quarter, Reliance Communications suffered a net loss of Rs 758 crore in the last financial year. Some think that these pressures will push prices up.
"Over the next two years, operators will have to focus on customer delight and service innovation. This will result in higher input costs which may result in tariffs moving northwards," says Prashant Singhal, telecom industry leader in consulting firm Ernst & Young. Hemant Joshi, partner (telecom practice), in consultancy firm Deloitte Haskins & Sells, says operators might introduce offerings with assured uptime and quality at differential pricing. "In developed markets such pricing already exists for data products," he says.
V Venkatesh of Chith Consulting, a Bangalore-based business strategy consulting firm, says providers might withdraw some of their unviable, highly incentivized packages and discontinue certain tariff plans once the validity period is over.
He says focusing on non-voice and better ARPUs (average revenue per user) would help industry improve its revenue growth rate.
Tuesday, June 7, 2011
India plays waiting game on IMF post
By James Lamont in New Delhi
Published: June 7 2011 18:44 | Last updated: June 7 2011 18:44
India has withheld its public support for the bid by Christine Lagarde, France’s finance minister, to become the president of the International Monetary Fund.
After a meeting with Ms Lagarde in New Delhi on Tuesday, Pranab Mukherjee, India’s finance minister, said there was “no assurance” given to support the European candidate for the top job at the multilateral organisation.
India is seeking to build a consensus over the position rather than find itself at the centre of a standoff between developed and developing nations over the leadership of the IMF.
“We are working on a consensus,” Mr Mukherjee said, adding it was “difficult to say” whether there was agreement between Brics countries over a common candidate for IMF leadership.
Mr Mukherjee acknowledged that there was a difference of opinion over a South African candidate, likely to have been Trevor Manuel, a long-serving finance minister.
Mr Mukherjee is to hold talks with Agustin Carstens, a rival candidate for the IMF job, on Friday as the governor of Mexico’s central bank seeks to garner support from Asian nations. Mr Carstens is also hoping to meet Manmohan Singh, India’s prime minister.
“[India] wants the election of a managing director of the IMF to be on the basis of merit and competence and to be held in a transparent manner and not on any particular nationality. There should be a consensus,” Mr Mukherjee said.
Ms Lagarde described her meeting as “excellent”. She praised Mr Mukherjee for his “affection” and India’s strong bilateral relationship with France, partly based on Paris’s decision not to sanction New Delhi after its nuclear weapons tests in the 1990s.
Indian Finance Minister Pranab Mukherjee, left, greets his French counterpart Christine Lagarde in New Delhi, India
Indian Finance Minister Pranab Mukherjee, greets his French counterpart Christine Lagarde in New Delhi
The French finance minister had come to the Indian capital on an international roadshow to promote her candidacy in the wake of the controversy surrounding Dominique Strauss-Kahn, the former IMF chief in the US.
She earlier visited Brazil, where she similarly failed to receive an explicit endorsement but is well regarded by its leaders.
Ms Lagarde is well liked and highly respected among India’s top economic policymakers. Montek Singh Ahulwalia, the deputy chairman of India’s planning commission and the country’s economic ambassador in global forums like the Group of 20 nations, counts her as a personal friend.
Some analysts say the lack of consensus around a candidate from the emerging markets is strengthening Ms Lagarde’s chances.
Eswar Prasad, a professor at Cornell University in the US and an adviser to the IMF, said India would be likely to hold its firepower over the IMF job for a future bid by one of its own nationals. It would, in the meantime, seek to extract promises from Ms Lagarde to boost the voice of emerging economies at the IMF.
“India will want to extract two commitments from Lagarde. [These include] a more transparent process to determine the formula for setting countries' voting shares at the IMF and continued momentum on reforms that give emerging markets more voting rights and greater representation,” he said.
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Published: June 7 2011 18:44 | Last updated: June 7 2011 18:44
India has withheld its public support for the bid by Christine Lagarde, France’s finance minister, to become the president of the International Monetary Fund.
After a meeting with Ms Lagarde in New Delhi on Tuesday, Pranab Mukherjee, India’s finance minister, said there was “no assurance” given to support the European candidate for the top job at the multilateral organisation.
India is seeking to build a consensus over the position rather than find itself at the centre of a standoff between developed and developing nations over the leadership of the IMF.
“We are working on a consensus,” Mr Mukherjee said, adding it was “difficult to say” whether there was agreement between Brics countries over a common candidate for IMF leadership.
Mr Mukherjee acknowledged that there was a difference of opinion over a South African candidate, likely to have been Trevor Manuel, a long-serving finance minister.
Mr Mukherjee is to hold talks with Agustin Carstens, a rival candidate for the IMF job, on Friday as the governor of Mexico’s central bank seeks to garner support from Asian nations. Mr Carstens is also hoping to meet Manmohan Singh, India’s prime minister.
“[India] wants the election of a managing director of the IMF to be on the basis of merit and competence and to be held in a transparent manner and not on any particular nationality. There should be a consensus,” Mr Mukherjee said.
Ms Lagarde described her meeting as “excellent”. She praised Mr Mukherjee for his “affection” and India’s strong bilateral relationship with France, partly based on Paris’s decision not to sanction New Delhi after its nuclear weapons tests in the 1990s.
Indian Finance Minister Pranab Mukherjee, left, greets his French counterpart Christine Lagarde in New Delhi, India
Indian Finance Minister Pranab Mukherjee, greets his French counterpart Christine Lagarde in New Delhi
The French finance minister had come to the Indian capital on an international roadshow to promote her candidacy in the wake of the controversy surrounding Dominique Strauss-Kahn, the former IMF chief in the US.
She earlier visited Brazil, where she similarly failed to receive an explicit endorsement but is well regarded by its leaders.
Ms Lagarde is well liked and highly respected among India’s top economic policymakers. Montek Singh Ahulwalia, the deputy chairman of India’s planning commission and the country’s economic ambassador in global forums like the Group of 20 nations, counts her as a personal friend.
Some analysts say the lack of consensus around a candidate from the emerging markets is strengthening Ms Lagarde’s chances.
Eswar Prasad, a professor at Cornell University in the US and an adviser to the IMF, said India would be likely to hold its firepower over the IMF job for a future bid by one of its own nationals. It would, in the meantime, seek to extract promises from Ms Lagarde to boost the voice of emerging economies at the IMF.
“India will want to extract two commitments from Lagarde. [These include] a more transparent process to determine the formula for setting countries' voting shares at the IMF and continued momentum on reforms that give emerging markets more voting rights and greater representation,” he said.
Copyright The Financial Times Limited 2011. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
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Monday, June 6, 2011
RBI doesn't see stress on liquidity in short term
Deputy Governor Shyamala Gopinath says central bank hopes the government’s borrowing programme will go on smoothly.
The Reserve Bank of India (RBI) did not see any stress on liquidity in the short-term as indicated from ruling call rates, Deputy Governor Shyamala Gopinath said today.
“We are closely monitoring the liquidity situation and are looking into various aspects of liquidity management. As of now, we don’t see a real stress on liquidity as indicated in ruling call rates,” Gopinath said here on the sidelines of launching mobile banking products of Canara Bank.
She, however, declined to comment on whether the central bank would conduct open market operation in June in order to ease any possible crunch in liquidity.
At an event in Mumbai, RBI Deputy Governor K C Chakrabarty said banks might use the newly introduced marginal standing facility (MSF) in the middle of this month when liquidity was expected to tighten sharply owing to advance tax payments.
“Every quarter it happens. I don’t think there is anything different in it. A new type of liquidity management facility has come. So, it will be tested. There can be problem at any time. The system has to adjust itself,” Chakrabarty said.
He was speaking on the sidelines of an event on new financial reporting and risk management.
RBI introduced MSF during the annual policy statement, which allowed banks to dip below one per cent of their statutory liquidity ratio to avail cash from this window. This facility will be available to banks at 100 basis points over the repo rate.
On the government’s borrowing programme, Gopinath said RBI was hopeful the process would go on smoothly.
“Government borrowing entirely depends on the market and how they bid for the auction. But, we do hope that it will go on smoothly,” Gopinath said.
On the possible direction of policy rates, she said it would depend on the evolving circumstances.
“We have increased policy rates by 50 basis points in the last credit policy review. We are also closely watching the various data coming from the market. Our future actions will depend on our own assessment of the circumstances as they evolve,” she added.
The apex bank has raised policy rates by nine times in the last 14 months in order to contain rising inflation rate. Impact of this policy rate hike has moderated economic growth in the recent time as shown in the latest IIP data.
About quality of foreign fund flow, she said that the central bank was not concerned about the quality of fund flow aspect as of now.
“Both government and RBI prefer more foreign direct investment into the country. However, we are not concerned about the quality of fund flow in the present circumstances,” she said.
The Reserve Bank of India (RBI) did not see any stress on liquidity in the short-term as indicated from ruling call rates, Deputy Governor Shyamala Gopinath said today.
“We are closely monitoring the liquidity situation and are looking into various aspects of liquidity management. As of now, we don’t see a real stress on liquidity as indicated in ruling call rates,” Gopinath said here on the sidelines of launching mobile banking products of Canara Bank.
She, however, declined to comment on whether the central bank would conduct open market operation in June in order to ease any possible crunch in liquidity.
At an event in Mumbai, RBI Deputy Governor K C Chakrabarty said banks might use the newly introduced marginal standing facility (MSF) in the middle of this month when liquidity was expected to tighten sharply owing to advance tax payments.
“Every quarter it happens. I don’t think there is anything different in it. A new type of liquidity management facility has come. So, it will be tested. There can be problem at any time. The system has to adjust itself,” Chakrabarty said.
He was speaking on the sidelines of an event on new financial reporting and risk management.
RBI introduced MSF during the annual policy statement, which allowed banks to dip below one per cent of their statutory liquidity ratio to avail cash from this window. This facility will be available to banks at 100 basis points over the repo rate.
On the government’s borrowing programme, Gopinath said RBI was hopeful the process would go on smoothly.
“Government borrowing entirely depends on the market and how they bid for the auction. But, we do hope that it will go on smoothly,” Gopinath said.
On the possible direction of policy rates, she said it would depend on the evolving circumstances.
“We have increased policy rates by 50 basis points in the last credit policy review. We are also closely watching the various data coming from the market. Our future actions will depend on our own assessment of the circumstances as they evolve,” she added.
The apex bank has raised policy rates by nine times in the last 14 months in order to contain rising inflation rate. Impact of this policy rate hike has moderated economic growth in the recent time as shown in the latest IIP data.
About quality of foreign fund flow, she said that the central bank was not concerned about the quality of fund flow aspect as of now.
“Both government and RBI prefer more foreign direct investment into the country. However, we are not concerned about the quality of fund flow in the present circumstances,” she said.
Markets open lower, auto shares slips
Markets opened lower tracking subdued global cues and weakness in auto shares. The Nifty slipped 20 points, at 5513 and the Sensex declined 60 points, at 18,362.
Analysts expect markets across the world to remain jittery ahead of the US Federal Reserve Ben Bernanke's speech. Given the weak economic data from the US economy, analysts expect Federal Reserve Chairman Ben Bernanke to talk about Quantitative Easing part three when he delivers speech on the US economic outlook later today. Last year in November the Federal Reserve injected $600 billion into the system by buying bonds to propel the US economy. Markets across the world will closely watch Bernanke's speech.
Across Asia markets were trading mixed. Hong Kong's Hang Seng slipped 1.6% as it was catching up to losses led by disappointing U.S. jobs data at the end of last week. South Korea's Seoul Composite plummeted 1%. The sell off seen today is mainly in the financials which were the worst performers since the past few trading sessions. Japan's Nikkei stock average and Shanghai Composite held on to marginal gains.
Back in India market Analysts expect range bound trade. Ashish Chaturmohta, Vice President - Derivatives and Technical Analyst said, "Nifty has crucial support around 5440 level, below which selling could be intense. Also the put maximum concentration is seen at 5400 strike price, suggesting an important level for the market. On the upside, if Nifty sustains above 5600 levels on closing basis, it may lead to marginal short covering the market."
Among individual stocks Oil India was unchanged at Rs 1,293 on news report that it plans new overseas subsidiary following its experience in Libya. Also UTV Software was unchanged at Rs 731 after 12% up move yesterday over the buzz that Walt Disney may hike stake in the company.
BSE Auto shares were leading the losses down 0.5%. Maruti Suzuki dipped 1.4% after workers went on a strike in Haryana disrupting production. Hero Honda declined 1% and Tata Motors was down 0.7%.
Defensive space Healthcare saw some buying interest. The BSE Healthcare index was up 0.2%. IPCA Laboratories gained 1.3%, Gloaxosmith Pharma added 0.8% and Apollo Hospital edged up 0.5%.
Broader markets were trading flat. The midcap and the smallcap indices were off 0.1% each.
Top losers on the Sensex were Maruti, down 1.4%, HDFC was off 1.2% and Tata Power was also down 1.2%. Prominent gainers on the Sensex were Reliance Infra, up 1.1%, Cipla gained 0.8% and Tata Steel was up 0.6%. Market breadth was positive, 627 stocks advanced for 449 stocks which declined.
Analysts expect markets across the world to remain jittery ahead of the US Federal Reserve Ben Bernanke's speech. Given the weak economic data from the US economy, analysts expect Federal Reserve Chairman Ben Bernanke to talk about Quantitative Easing part three when he delivers speech on the US economic outlook later today. Last year in November the Federal Reserve injected $600 billion into the system by buying bonds to propel the US economy. Markets across the world will closely watch Bernanke's speech.
Across Asia markets were trading mixed. Hong Kong's Hang Seng slipped 1.6% as it was catching up to losses led by disappointing U.S. jobs data at the end of last week. South Korea's Seoul Composite plummeted 1%. The sell off seen today is mainly in the financials which were the worst performers since the past few trading sessions. Japan's Nikkei stock average and Shanghai Composite held on to marginal gains.
Back in India market Analysts expect range bound trade. Ashish Chaturmohta, Vice President - Derivatives and Technical Analyst said, "Nifty has crucial support around 5440 level, below which selling could be intense. Also the put maximum concentration is seen at 5400 strike price, suggesting an important level for the market. On the upside, if Nifty sustains above 5600 levels on closing basis, it may lead to marginal short covering the market."
Among individual stocks Oil India was unchanged at Rs 1,293 on news report that it plans new overseas subsidiary following its experience in Libya. Also UTV Software was unchanged at Rs 731 after 12% up move yesterday over the buzz that Walt Disney may hike stake in the company.
BSE Auto shares were leading the losses down 0.5%. Maruti Suzuki dipped 1.4% after workers went on a strike in Haryana disrupting production. Hero Honda declined 1% and Tata Motors was down 0.7%.
Defensive space Healthcare saw some buying interest. The BSE Healthcare index was up 0.2%. IPCA Laboratories gained 1.3%, Gloaxosmith Pharma added 0.8% and Apollo Hospital edged up 0.5%.
Broader markets were trading flat. The midcap and the smallcap indices were off 0.1% each.
Top losers on the Sensex were Maruti, down 1.4%, HDFC was off 1.2% and Tata Power was also down 1.2%. Prominent gainers on the Sensex were Reliance Infra, up 1.1%, Cipla gained 0.8% and Tata Steel was up 0.6%. Market breadth was positive, 627 stocks advanced for 449 stocks which declined.
StanChart IDRs tank as sebi bars conversion into underlying shares
MUMBAI: Standard Chartered's IDR, the first in India, sank to its lowest since debut a year ago after the market regulator said that the bank cannot convert the IDRs into underlying shares.
The Indian Depositary Receipts (IDRs) closed at Rs 94.55 on the Bombay Stock Exchange, down 17.5% from the previous close. Intraday, it hit the 20% lower circuit, which is also a 52-week low.
The move implies that IDR holders will not benefit from arbitrage due to the price gap between the Indian exchanges, where the IDRs are listed, and the London Stock Exchange or Hong Kong Stock Exchange, where the underlying shares are listed.
"The move has reduced the attractiveness of this instrument for traders," said Lalit Thakkar, managing director - institution, Angel Broking .
The conversion of IDRs into underlying shares will be allowed only if the annualised trading volume over the six months preceding the redemption is less than 5% of the total securities issued, Sebi said. However, the trading volume of StanChart's IDR was higher.
StanChart had said in its offer document that the IDRs could not be converted into underlying shares before one year from the date of issue. The one-year lock-in for the IDRs was to end on June 11, making them eligible for conversion.
Experts said the capital market regulator's recent move, along with issues such as lack of clarity on tax, voting rights, absence of arbitrage opportunity and insurance companies not being allowed to invest, could further put off foreign companies from listing in India. Since the listing of StanChart IDR in June last year, no other global company has shown interest in the instrument.
"One of the reasons for no other IDR was the lack of clarity on redemption. However, there is still lack of clarity on capital gains tax and non-participation of insurance companies. If the IDRs are to be promoted, then there is need to put them on par with shares of listed companies," said Pavan Kumar Vijay, managing director, Corporate Professionals.
IDRs incur short-term capital gains tax of 30%, double of what is charged for shares and also have a long-term capital gains tax of 20%, which is exempt on shares. Also, Sebi has not given clarity on voting rights for IDR holders, leaving it to the discretion of the issuer.
"We are hopeful that there would be more clarity on policies around imposition of capital gains tax and permitting insurance companies to invest in IDR. These changes could boost the IDR market," said Neeraj Swaroop , regional CEO - India and South Asia, Standard Chartered Bank .
Suhail Nathani, partner, Economic Laws Practice, said, "The issuers have several options and listing in India must compete with other jurisdictions. Regulatory authorities should address concerns and make policy to attract issuers and investors alike."
India contributes around one-fifth of the UK banks profit and oneeighth of its revenue. The IDR has seen FII holding doubling to about 70% in March from 38% on the day of listing, while retail participation has been flat at 8%.
The Indian Depositary Receipts (IDRs) closed at Rs 94.55 on the Bombay Stock Exchange, down 17.5% from the previous close. Intraday, it hit the 20% lower circuit, which is also a 52-week low.
The move implies that IDR holders will not benefit from arbitrage due to the price gap between the Indian exchanges, where the IDRs are listed, and the London Stock Exchange or Hong Kong Stock Exchange, where the underlying shares are listed.
"The move has reduced the attractiveness of this instrument for traders," said Lalit Thakkar, managing director - institution, Angel Broking .
The conversion of IDRs into underlying shares will be allowed only if the annualised trading volume over the six months preceding the redemption is less than 5% of the total securities issued, Sebi said. However, the trading volume of StanChart's IDR was higher.
StanChart had said in its offer document that the IDRs could not be converted into underlying shares before one year from the date of issue. The one-year lock-in for the IDRs was to end on June 11, making them eligible for conversion.
Experts said the capital market regulator's recent move, along with issues such as lack of clarity on tax, voting rights, absence of arbitrage opportunity and insurance companies not being allowed to invest, could further put off foreign companies from listing in India. Since the listing of StanChart IDR in June last year, no other global company has shown interest in the instrument.
"One of the reasons for no other IDR was the lack of clarity on redemption. However, there is still lack of clarity on capital gains tax and non-participation of insurance companies. If the IDRs are to be promoted, then there is need to put them on par with shares of listed companies," said Pavan Kumar Vijay, managing director, Corporate Professionals.
IDRs incur short-term capital gains tax of 30%, double of what is charged for shares and also have a long-term capital gains tax of 20%, which is exempt on shares. Also, Sebi has not given clarity on voting rights for IDR holders, leaving it to the discretion of the issuer.
"We are hopeful that there would be more clarity on policies around imposition of capital gains tax and permitting insurance companies to invest in IDR. These changes could boost the IDR market," said Neeraj Swaroop , regional CEO - India and South Asia, Standard Chartered Bank .
Suhail Nathani, partner, Economic Laws Practice, said, "The issuers have several options and listing in India must compete with other jurisdictions. Regulatory authorities should address concerns and make policy to attract issuers and investors alike."
India contributes around one-fifth of the UK banks profit and oneeighth of its revenue. The IDR has seen FII holding doubling to about 70% in March from 38% on the day of listing, while retail participation has been flat at 8%.
No need to file return for income up to Rs 5 lakh
NEW DELHI: As many as 85 lakh salaried taxpayers whose taxable income, including salary and interest income, is up to Rs 5 lakh, will not be required to file income-tax return from now.
"No income tax returns is required for salaried persons whose annual annual taxable income including salary and interest is up to Rs 5 lakh. We would shortly notify this," a Central Board of Direct Taxes official said.
However, he said this would not cover income from other sources like house property , capital gains and gains from profession and business.
The scheme would be applicable from assessment year 2011-12 onwards. This means that salaried persons eligible under the scheme would not have to file returns for the financial year 2010-11 in 2011-12 (assessment year).
Under the scheme, those salaried persons who want to claim tax refund, would have to income tax file return.
As per the Memorandum to the Finance Bill 2011, the government will be issuing a notification exempting 'classes of persons' from the requirement of furnishing income tax returns.
Under the scheme, the salaried person wants exemption from filing IT return, has to disclose about the incomes like dividend and interest to his employer for tax deduction. In the scenario, the Form 16 issued to salaried employees will be treated as income tax return. At present, it is obligatory for all salaried persons to file income tax return under the Income Tax Act, 1961.
The idea behind the move is that in cases where there are no other sources of income, filing of a return is a duplication of existing information.
"No income tax returns is required for salaried persons whose annual annual taxable income including salary and interest is up to Rs 5 lakh. We would shortly notify this," a Central Board of Direct Taxes official said.
However, he said this would not cover income from other sources like house property , capital gains and gains from profession and business.
The scheme would be applicable from assessment year 2011-12 onwards. This means that salaried persons eligible under the scheme would not have to file returns for the financial year 2010-11 in 2011-12 (assessment year).
Under the scheme, those salaried persons who want to claim tax refund, would have to income tax file return.
As per the Memorandum to the Finance Bill 2011, the government will be issuing a notification exempting 'classes of persons' from the requirement of furnishing income tax returns.
Under the scheme, the salaried person wants exemption from filing IT return, has to disclose about the incomes like dividend and interest to his employer for tax deduction. In the scenario, the Form 16 issued to salaried employees will be treated as income tax return. At present, it is obligatory for all salaried persons to file income tax return under the Income Tax Act, 1961.
The idea behind the move is that in cases where there are no other sources of income, filing of a return is a duplication of existing information.
CII to help in building Brand UP
LUCKNOW: Industry in Uttar Pradesh is all set to get a helping hand from the Confederation of Indian Industry in the current fiscal. Apart from the state government's own initiatives to build Brand UP, even the industry body will offer support to build an industry-friendly environment.
Saying that nearly 86% of CII's membership lies in the micro, small and medium enterprises (MSME), CII northern region chairman and chief executive officer, NIIT, Vijay Thadani, on Monday, said UP has plenty of potential for business and industry. He added that CII would invite member and non-member industrialists to Lucknow for interaction with top state government officials to explore investment options in UP. The first of these events, Thadani said, would be organized in September this year.
Announcing their plan for UP for the remaining fiscal, Thadani said CII would work towards addressing the demand for skilled labour, and announced that UP would be home to one of the four Centres of Excellence for skill development proposed for CII's northern region. These, he added, would be state-run universities opened in partnership with industry and would have them setting up finishing schools for students, providing research opportunities to faculty and assisting in curriculum upgradation.
Apart from encouraging the government to participate in CII road-shows and national events on a regular basis to promote UP's investment opportunities, CII's key focus areas will also include education, environment, employment, employability and entrepreneurship. "Our attempt is to enhance employability of trained youth and bring them at par with industry standards. We propose to take up programmes to boost entrepreneurship in the MSME sector," Thadani said.
CII will also train teachers and trainers at Industrial Training Institutes in 16 districts of UP in the first phase of these operations. Following this initiative, it will also start a skill development programme in association with the British Council and the Aditya Birla Group in Sitapur district, where 1,500 below povert line youth, studying at these it is, are expected to be trained over a period of two years.
Chairman, CII UP State Council, Ved Krishna, said: "We are in talks with the industrial and infrastructure development commissioner and Udyog Bandhu to understand the areas in which CII can partner with the state government. There is a mutual agreement that both the industry and the government need to work towards a better branding of UP to attract better investments."
Saying that nearly 86% of CII's membership lies in the micro, small and medium enterprises (MSME), CII northern region chairman and chief executive officer, NIIT, Vijay Thadani, on Monday, said UP has plenty of potential for business and industry. He added that CII would invite member and non-member industrialists to Lucknow for interaction with top state government officials to explore investment options in UP. The first of these events, Thadani said, would be organized in September this year.
Announcing their plan for UP for the remaining fiscal, Thadani said CII would work towards addressing the demand for skilled labour, and announced that UP would be home to one of the four Centres of Excellence for skill development proposed for CII's northern region. These, he added, would be state-run universities opened in partnership with industry and would have them setting up finishing schools for students, providing research opportunities to faculty and assisting in curriculum upgradation.
Apart from encouraging the government to participate in CII road-shows and national events on a regular basis to promote UP's investment opportunities, CII's key focus areas will also include education, environment, employment, employability and entrepreneurship. "Our attempt is to enhance employability of trained youth and bring them at par with industry standards. We propose to take up programmes to boost entrepreneurship in the MSME sector," Thadani said.
CII will also train teachers and trainers at Industrial Training Institutes in 16 districts of UP in the first phase of these operations. Following this initiative, it will also start a skill development programme in association with the British Council and the Aditya Birla Group in Sitapur district, where 1,500 below povert line youth, studying at these it is, are expected to be trained over a period of two years.
Chairman, CII UP State Council, Ved Krishna, said: "We are in talks with the industrial and infrastructure development commissioner and Udyog Bandhu to understand the areas in which CII can partner with the state government. There is a mutual agreement that both the industry and the government need to work towards a better branding of UP to attract better investments."
Sunday, June 5, 2011
India Plans Biggest Highway Expansion With $12 Billion Projects
By Karthikeyan Sundaram - Jun 6, 2011 12:03 AM GMT+0530
India will award 550 billion rupees ($12 billion) of highway construction projects this year, its biggest expansion, as the nation aims to remove infrastructure bottlenecks that hinder economic growth.
The 7,300 kilometer (4,536 miles)-project includes new expressways as well as widening of existing roads through the year ending March 31, J.N. Singh, finance chief of National Highways Authority of India, said in an interview in New Delhi. The state-run NHAI will pay for the acquisition of land required for the road construction, he said on June 2.
The agency plans to raise 120 billion rupees this year by selling bonds, Singh said, to partly fund the project that stretches a distance almost equivalent of London to Mumbai. NHAI is accelerating road construction as India aims to spend $1 trillion in the five years to 2017 to improve an infrastructure ranked worse than that in Sri Lanka and Botswana by the World Economic Forum’s Global Competitiveness Index.
The nation hasn’t met its target of building roads at a daily average of 20 kilometers, completing just 12 kilometers a day since April 2007, according to NHAI website. Acquisition of land for factories and highways have sparked rioting and stalled more than $100 billion of projects across India, according to the Associated Chambers of Commerce & Industry.
“The works we award now will get us to the target of 20 kilometers a day in three years,” Singh said. Building one kilometer of a six-lane highway needs an investment of 130 million rupees, he said.
Caterpillar, Terex
NHAI, responsible for implementing the highway development program, gets part of its money from a levy on the sale of gasoline and diesel, toll collection and sale of bonds. It awarded 12,034 kilometers of road projects in the five years to March 2011.
Companies that win the contract will build roads and collect tolls for up to 30 years before transferring them to the state, Singh said. The nation’s push to upgrade its infrastructure has prompted heavy equipment makers such as Caterpillar Inc. (CAT) and Terex Corp. (TEX) to expand in India, where the economy expanded at an average pace of more than 8 percent in the last five years.
“Focus on road sector will directly boost gross domestic product and indirectly help manufacturing sector," said Kumar Ramesh, an analyst with Frost & Sullivan. "The involvement of private sector has significantly reduced delays in execution” of projects, he said.
India’s infrastructure is ranked 91 out of 139 nations by the World Economic Forum’s Global Competitiveness Index. Poor transport and other inadequate infrastructure could cost 1.1 percentage points of economic growth, or $200 billion in 2017, McKinsey & Co. said in a report in 2009.
To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net
To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net.
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
India will award 550 billion rupees ($12 billion) of highway construction projects this year, its biggest expansion, as the nation aims to remove infrastructure bottlenecks that hinder economic growth.
The 7,300 kilometer (4,536 miles)-project includes new expressways as well as widening of existing roads through the year ending March 31, J.N. Singh, finance chief of National Highways Authority of India, said in an interview in New Delhi. The state-run NHAI will pay for the acquisition of land required for the road construction, he said on June 2.
The agency plans to raise 120 billion rupees this year by selling bonds, Singh said, to partly fund the project that stretches a distance almost equivalent of London to Mumbai. NHAI is accelerating road construction as India aims to spend $1 trillion in the five years to 2017 to improve an infrastructure ranked worse than that in Sri Lanka and Botswana by the World Economic Forum’s Global Competitiveness Index.
The nation hasn’t met its target of building roads at a daily average of 20 kilometers, completing just 12 kilometers a day since April 2007, according to NHAI website. Acquisition of land for factories and highways have sparked rioting and stalled more than $100 billion of projects across India, according to the Associated Chambers of Commerce & Industry.
“The works we award now will get us to the target of 20 kilometers a day in three years,” Singh said. Building one kilometer of a six-lane highway needs an investment of 130 million rupees, he said.
Caterpillar, Terex
NHAI, responsible for implementing the highway development program, gets part of its money from a levy on the sale of gasoline and diesel, toll collection and sale of bonds. It awarded 12,034 kilometers of road projects in the five years to March 2011.
Companies that win the contract will build roads and collect tolls for up to 30 years before transferring them to the state, Singh said. The nation’s push to upgrade its infrastructure has prompted heavy equipment makers such as Caterpillar Inc. (CAT) and Terex Corp. (TEX) to expand in India, where the economy expanded at an average pace of more than 8 percent in the last five years.
“Focus on road sector will directly boost gross domestic product and indirectly help manufacturing sector," said Kumar Ramesh, an analyst with Frost & Sullivan. "The involvement of private sector has significantly reduced delays in execution” of projects, he said.
India’s infrastructure is ranked 91 out of 139 nations by the World Economic Forum’s Global Competitiveness Index. Poor transport and other inadequate infrastructure could cost 1.1 percentage points of economic growth, or $200 billion in 2017, McKinsey & Co. said in a report in 2009.
To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net
To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net.
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.
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